C.(62) 1
- Use of Christmas Island for United States Nuclear Tests. Memorandum by the Prime Minister.
2
- Estimates, 1962-63. Memorandum by the Chief Secretary to the Treasury and Paymaster-General.
3
- Public Expenditure, 1962-63 to 1965-66. Memorandum by the Chief Secretary to the Treasury and PaymasterGeneral.
4
- Educational Expenditure. Memorandum by the Chief Secretary to the Treasury and Paymaster-General.
5
- Education Policy.
6
- Railway Wages.
7
-
8
- University Salaries. Exchequer.
9
-
Incomes Policy: The Future of Arbitration. by the Chancellor of the Exchequer.
10
-
Pay Policy for the Public Services during the "Intermediate Period", Memorandum by the Chief Secretary to the Treasury and Paymaster-General.
11
- Pay Claims.
12
- Visit to West Berlin. Memorandum by the Secretary of State for Foreign Affairs.
13
-
34
- United Nations Bond Issue. Memorandum by the Secretary of State for Foreign Affairs.
15
-
Laos. Memorandum by the Secretary of State for Foreign Affairs.
16
-
Public Expenditure. Memorandum by the Chief Secretary to the Treasury and Paymaster-General.
17
-
Whaling in South Georgia. Memorandum by the Minister of State for Colonial Affairs.
18
- United Nations Bond Issue. Memorandum by the Secretary of State for Foreign Affairs.
19
- Krupp Deconcentration. for Foreign Affairs.
20
-
Incomes Policy.
21
-
Short-term Economies in the Cost of Agricultural Support and the Annual Farm Price Review. Memorandum by the Chief Secretary to the Treasury and Paymaster-General.
22
- Kenya. Memorandum by the Secretary of State for the Colonies.
23
- Defence White Paper, 1962.
Incomes Policy.
Memorandum by the Minister of Education.
Note by the Secretary of the Cabinet. Note by the Chancellor of the Exchequer. Memorandum by the Chancellor of the Memorandum
Note by the Chancellor of the Exchequer.
Cost of United Nations Operations in the Congo. Memorandum by the Secretary of State for Foreign Affairs.
Memorandum by the Secretary of State
Note by the Chancellor of the Exchequer.
Note by the Minister of Defence.
C.(62) 24
- Defence Policy.
Note by the Minister of Defence.
25 -
Light Cargo Aircraft. Memorandum by the Minister of
Defence and the Minister of Aviation.
26
-
Home Defence: Dispersal Policy. Memorandum by the Secretary of State for the Home Department, the Secretary of State for Scotland and the Minister of Housing and Local Government and Minister for Welsh Affairs.
27
-
Economic Policy and Public Expenditure. the Chancellor of the Exchequer.
Memorandum by
28 - Decisions on Savings. Memorandum by the Chief Secretary
to the Treasury and Paymaster-General.
29
-
30
- Rotodyne.
31
-
32
- Farm Price Review, 1$62, Memorandum by the Minister of Agriculture, Fisheries and Food.
33
-
34
- Revision of Machinery for the Settlement of Teachers' Remuneration. Note by the Minister of Education.
35
-
Proposed Building in Broad Sanctuary. Minister of Works.
36
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Post Office Giro System. General.
37
-
Oxford Roads. Memorandum by the Secretary of State for the Home Department.
38
- University Expansion and University Salaries. Memorandum by the Secretary of State for the Home Department.
39
- Public Expenditure^ Exchequer,:
40
- Uganda - Financial Settlement. Memorandum by the Secretary of State for the Colonies.
41
- Northern Rhodesia - Constitution. Prime Minister.
42
-
43
- Smoking and Health. Memorandum by the Secretary of State for the Home Department.
44
"
Service Pay and the Pay Pause. of Defence.
Memorandum by the Minister
Note by the Minister of Aviation.
Berlin. Memorandum by the Secretary of State for Foreign Affairs.
The Effect on Householders of Revaluation for Rates in 19^3o Memorandum by the Minister of Housing and Local Government and Minister for Welsh Affairs.
Memorandum by the
Memorandum by the Postmaster-
Note by the Chancellor of the
Memorandum by the
Northern Rhodesia - Constitution. Memorandum by the Secretary of State for the Colonies.
Birmingham: Land for Housing. Memorandum by the Minister of Housing and Local Government and Minister for Welsh Affairs,
C . ( 6 2 ) 45
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The Effect on Householders of Revaluation for Rates in 1963. Memorandum by the Chancellor of the Duchy of Lancaster.
46
-
The Effect on Householders of Revaluation for Rates in 1963. Memorandum by the Chief Secretary to the Treasury and Paymaster-General.
47
"
Investment in the Private Sector. Chancellor of the Exchequer.
48
- Disarmament. Memorandum by the Secretary of State for Foreign Affairs.
49
- Farm Price Review, 19^2, Note by the Minister of Agriculture, Fisheries and Food.
50
- European and Asian Farming in Kenya. Memorandum by the Secretary of State for the Colonies,
Memorandum by the
THIS DOCUMENT IS THE PROPERTY OF HER BRITANNIC MAJESTY'S GOVERNMENT
T h e circulation of this paper has foeer^trictly limiteeb^
^
It is issued for the personal use of. . ^ i i ^ . . ^ . i / y ^ r r ^ ^ . . l ^ - ^ ^ ^ ' ^ T O P SECRET
Copy Mo..
....
C^(62)J. 1st J a n u a r y , 1962 CABINET
USE O F CHRISTMAS ISLAND F O R
UNITED STATES NUCLEAR TESTS
M e m o r a n d u m by t h e P r i m e M i n i s t e r
D u r i n g t h e m e e t i n g w h i c h t h e F o r e i g n S e c r e t a r y and I h a d w i t h P r e s i d e n t K e n n e d y a n d M r . R u s k in B e r m u d a on 21st a n d 22nd D e c e m b e r we d i s c u s s e d a t l e n g t h t h e p o s s i b i l i t y of t h e U n i t e d S t a t e s r e s u m i n g n u c l e a r t e s t s i n t h e a t m o s p h e r e . We w e r e m u c h a s s i s t e d in o u r d i s c u s s i o n s by S i r W i l l i a m P e n n e y , D e p u t y C h a i r m a n of t h e U n i t e d K i n g d o m A t o m i c E n e r g y A u t h o r i t y , a n d D r . S e a b o r g , C h a i r m a n of t h e U n i t e d S t a t e s A t o m i c Energy Commission, 2. ^ A s s e s s m e n t of t h e r e c e n t s e r i e s of S o v i e t t e s t s Sir William P e n n e y and D r S e a b o r g explained that the r e c e n t s e r i e s of S o v i e t t e s t s h a d u n d o u b t e d l y b e e n of m i l i t a r y s i g n i f i c a n c e . T h e S o v i e t U n i o n h a s n o t d r a w n a h e a d of t h e W e s t in n u c l e a r k n o w l e d g e but the lead which the West p r e v i o u s l y p o s s e s s e d h a s d i s a p p e a r e d . The R u s s i a n s m a y n o w k n o w m o r e t h a n t h e W e s t a b o u t 100 m e g a t o n w e a p o n s a n d t h e i r effects, although the West a r e still b e t t e r informed about light w e i g h t w e a p o n s w i t h an e x p l o s i v e p o w e r of a b o u t o n e m e g a t o n . If b o t h s i d e s now r e f r a i n e d f r o m c o n d u c t i n g f u r t h e r t e s t s t h e b a l a n c e of t h e d e t e r r e n t c o u l d b e h e l d . T h e i n d i c a t i o n s a r e , h o w e v e r , t h a t s o m e of t h e S o v i e t t e s t s w e r e d i r e c t e d t o w a r d s t h e d e v e l o p m e n t of a n t i - m i s s i l e s y s t e m s . If t h e r e f o r e t h e R u s s i a n s , a f t e r a f u r t h e r p e r i o d of p r e p a r a t i o n , w h i c h m i g h t t a k e a s long a s t w o y e a r s , w e r e t o c o n d u c t a f u r t h e r s e r i e s of t e s t s and the West had m e a n w h i l e r e f r a i n e d f r o m f u r t h e r t e s t i n g , the Soviet Union m i g h t t h e n b e a t a s i g n i f i c a n t a d v a n t a g e i n t h e a n t i - m i s s i l e f i e l d . 0
3.
P o s s i b i l i t i e s of a n a n t i - m i s s i l e d e f e n c e
Both the B r i t i s h and the A m e r i c a n s c i e n t i s t s a g r e e that the d i f f i c u l t i e s of d e v e l o p i n g a n e f f e c t i v e a n t i - m i s s i l e d e f e n c e a r e e n o r m o u s . T o b e r e a l l y effective s u c h a s y s t e m . w o u l d h a v e to b e a b l e to d e s t r o y o v e r 90 p e r c e n t of a n y a t t a c k i n g m i s s i l e s . T h i s w o u l d b e e x t r e m e l y difficult in a n y c a s e , b u t t h e t a s k of t h e d e f e n d e r s c o u l d be m a d e e v e n h a r d e r if a t t a c k i n g m i s s i l e s h a d d e c o y s i n t h e m . In a d d i t i o n i t i s p o s s i b l e t h a t v e r y l a r g e e x p l o s i o n s at h i g h a l t i t u d e s m i g h t f u r t h e r c o m p l i c a t e the defence by i n t e r r u p t i n g r a d a r and r a d i o s y s t e m s . F i n a l l y , s u c h w e a p o n s , e x p l o d e d p e r h a p s a s f a r a s 25 m i l e s f r o m t h e e a r t h , w o u l d b e m u c h h a r d e r t o d e s t r o y b y a n t i - m i s s i l e a t t a c k t h a n w o u l d w e a p o n s s e t to -1
e x p l o d e at l o w e r a l t i t u d e s . But n u c l e a r w e a p o n s i n t h e 80-100 m e g a t o n r a n g e could c a u s e g r e a t d e s t r u c t i o n by t h e i r h e a t a n d f i r e - r a i s i n g effects even though they w e r e exploded at t h e s e high a l t i t u d e s . Our e x p e r t s , t h e r e f o r e , c o n c l u d e d t h a t t h e c h a n c e s of e f f e c t i v e a n t i - m i s s i l e d e f e n c e were extremely remote. N e v e r t h e l e s s , the s t a k e s w e r e so high and t h e r e s o u r c e s a v a i l a b l e t o t h e S o v i e t Union a n d to t h e U n i t e d S t a t e s w e r e s o g r e a t t h a t it w a s i m p o s s i b l e e n t i r e l y t o d i s c o u n t t h e p o s s i b i l i t y that such a defensive system might eventually be developed. M o r e o v e r , if one s i d e o r t h e o t h e r m a d e s i g n i f i c a n t p r o g r e s s in t h i s f i e l d , e v e n if it f e l l s h o r t of a c o m p l e t e l y e f f e c t i v e s y s t e m , o r if t h e y c o u l d p l a u s i b l y c l a i m to h a v e d o n e s o , t h e b a l a n c e of t h e d e t e r r e n t m i g h t b e d e c i s i v e l y u p s e t . C o n s e q u e n t l y , in t h e a b s e n c e of an a d e q u a t e l y c o n t r o l l e d b a n on n u c l e a r t e s t s , n e i t h e r t h e W e s t n o r t h e S o v i e t Union c o u l d a f f o r d t o r e n o u n c e the effort n e c e s s a r y to t r y to m a k e p r o g r e s s in this field. 4*
V a l u e of C h r i s t m a s I s l a n d
T h e r e a r e v a r i o u s p l a c e s in w h i c h f u r t h e r n u c l e a r t e s t s could be c o n d u c t e d b u t t h e r e a r e o b j e c t i o n s t o a l l of t h e m . N e v a d a i s t o o n e a r populated a r e a s , Johnston Island is v e r y s m a l l and Eniwetok, as well a s being a t r u s t t e r r i t o r y , would take l o n g e r to r e - a c t i v a t e than C h r i s t m a s I s l a n d , T e s t s c o u l d be c o n d u c t e d f r o m s h i p s a t s e a , but t h e s e w o u l d b e v e r y e x p e n s i v e and i t w o u l d t a k e a l o n g t i m e t o m o u n t t h e m . T h e e x i s t i n g f a c i l i t i e s a t C h r i s t m a s I s l a n d a r e in good r e p a i r a n d c o u l d b e a d a p t e d in t w o ox- t h r e e m o n t h s , and t h e ax-eais l a r g e e n o u g h t o accommodate the s e v e r a l thousand people needed for a l a r g e s e r i e s of t e s t s r a p i d l y c o n d u c t e d . T h e r e i s a l s o s p a c e on t h e i s l a n d f o r t h e l a r g e n u m b e r of i n s t r u m e n t s n e e d e d . T h e A m e r i c a n s w o u l d n o t , h o w e v e r , p r o p o s e to c o n d u c t a t C h r i s t m a s I s l a n d t h e w h o l e of t h e n e w s e r i e s of t e s t s w h i c h t h e y h a v e in m i n d . T h e v e r y h i g h a l t i t u d e t e s t s w o u l d be m a d e e l s e w h e r e . They a l s o i n d i c a t e d that they would r e f r a i n f r o m m a k i n g a t C h r i s t m a s I s l a n d a n y t e s t s i n v o l v i n g e x p l o s i o n s on t h e g r o u n d o r in b a r g e s , w h i c h w o u l d e n t a i l e s p e c i a l l y l a r g e d a n g e r of g r o u n d c o n t a m i n a t i o n . 5*
P u r p o s e s of t h e p r o p o s e d t e s t s
The P r e s i d e n t and his a d v i s e r s explained in s o m e detail e x a c t l y w h a t t h e y w i s h e d t o a c h i e v e b y t h e p r o p o s e d s e r i e s qf t e s t s . T h e s e w o u l d i n c l u d e h i g h a l t i t u d e t e s t s t o m e a s u r e e f f e c t s on m i s s i l e s c a r r y i n g n u c l e a r w a r h e a d s a n d on r a d a r a n d r a d i o c o m m u n i c a t i o n s j t e s t s of e x i s t i n g w a r h e a d s w h i c h m i g h t p a v e t h e w a y for w e i g h t r e d u c t i o n s ? and o t h e r t e s t s of v a r i o u s a d v a n c e d d e s i g n s a l s o w i t h t h e a i m of r e d u c i n g w e i g h t . T h e a d v a n t a g e of m a k i n g w a r h e a d s l i g h t e r i s t h a t d e c o y s and other e l e c t r o n i c deviaes can be c a r r i e d . All the p r o p o s e d t e s t s a r e t h e r e f o r e d i r e c t l y r e l a t e d t o t h e p o s s i b i l i t i e s of d e v e l o p i n g o r d e f e a t i n g a n a n t i - m i s s i l e s y s t e m . It w o u l d b e h a r d t o a r g u e t h a t t h e s e a r e n o t " n e c e s s a r y in o r d e r t o m a i n t a i n t h e b a l a n c e of t h e d e t e r r e n t " . The t h r e a t i s n o t i m m e d i a t e b u t m a y b e c o m e s o e v e n by 1964. 6*
P r e s i d e n t Kennedy's attitude
P r e s i d e n t Kennedy m a d e it c l e a r that he had not yet d e c i d e d t o r e s u m e n u c l e a r t e s t s in t h e a t m o s p h e r e . He s a i d s p e c i f i c a l l y t h a t h e w i s h e d t o a v o i d t a k i n g t h i s d e c i s i o n if h e c o n s c i e n t i o u s l y c o u l d . At t h e s a m e t i m e , h e i n d i c a t e d t h a t h e w a s l i k e l y t o d e c i d e in t h e s p r i n g of 1962 t h a t t e s t s m u s t b e r e s u m e d u n l e s s b y t h e n s o m e s u b s t a n t i a l i m p r o v e m e n t h a d t a k e n p l a c e in E a s t / W e s t r e l a t i o n s . A n d m e a n w h i l e h e f e l t t h a t h e c o u l d n o t a v o i d m a k i n g t h e p r e p a r a t i o n s n e c e s s a r y in o r d e r -2
t o e n a b l e t h e U n i t e d S t a t e s t o r e s u m e t e s t i n g if in t h r e e o r f o u r m o n t h s ' t i m e such a decision s e e m e d right. The P r e s i d e n t hoped that the United K i n g d o m v/ould a g r e e b o t h t o s u p p o r t a U n i t e d S t a t e s d e c i s i o n t o r e s u m e a t m o s p h e r i c t e s t i n g if t h i s w e r e m a d e a n d to s h a r e in t h e t e s t s by p u t t i n g C h r i s t m a s I s l a n d a t t h e d i s p o s a l of t h e U n i t e d S t a t e s . He f e l t t h a t a g r e e m e n t on b o t h t h e s e p o i n t s s h o u l d b e s i m u l t a n e o u s , a l t h o u g h a c t i o n on t h e s e c o n d would h a v e t o b e t a k e n b e f o r e t h e f i r s t d e c i s i o n h a d been made. 7. I m a d e c l e a r t h e d i s t a s t e w i t h w h i c h t h e U n i t e d K i n g d o m Govern- m e n t c o n t e m p l a t e d a n y f u r t h e r r e s u m p t i o n of n u c l e a r t e s t s . In p a r t i c u l a r , I e x p r e s s e d the strong view that the West should not r e s u m e n u c l e a r t e s t s unless they w e r e satisfied that it w a s i m p r a c t i c a b l e to halt the n u c l e a r a r m s r a c e . Without p r e j u d i c e t o t h e i m m e d i a t e q u e s t i o n , t h e r e f o r e ; I p r o p o s e d that the United States and the United Kingdom should jointly c o n s i d e r the p o s s i b i l i t y of s o m e f r e s h i n i t i a t i v e in t h e f i e l d of d i s a r m a m e n t . F r e s i d e n t Kennedy was not, I thought, opposed to such a plan in p r i n c i p l e , b u t h e could n o t s e e any p r a c t i c a l m e t h o d of c a r r y i n g i t o u t . I u n d e r t o o k to let h i m have m y detailed thoughts a s soon as p o s s i b l e . 8. On t h e i m m e d i a t e i s s u e I e x p l a i n e d t h a t I c o u l d n o t a g r e e t o t h e u s e of C h r i s t m a s I s l a n d w i t h o u t c o n s u l t i n g m y C a b i n e t c o l l e a g u e s . I a l s o told the P r e s i d e n t that a f o r m a l a g r e e m e n t would be n e c e s s a r y a b o u t A m e r i c a n u s e of C h r i s t m a s I s l a n d a n d p r o p o s e d t h a t o u r e x p e r t s should c o n s i d e r this question at once without p r e j u d i c e to any final d e c i s i o n . F i n a l l y , I t o l d P r e s i d e n t K e n n e d y t h a t I r e c o g n i s e d t h a t , if t h e C a b i n e t d e c i d e d to a l l o w t h e U n i t e d S t a t e s t o u s e C h r i s t m a s I s l a n d f o r n u c l e a r t e s t i n g and t h e U n i t e d S t a t e s c o n s e q u e n t l y d e v o t e d t i m e a n d e f f o r t to p r e p a r a t i o n s on t h e i s l a n d , i t w o u l d b e u n r e a s o n a b l e f o r t h e United Kingdom G o v e r n m e n t to c l a i m m o r e than a r i g h t to be consulted a b o u t t h e f i n a l d e c i s i o n ^ we c o u l d n o t a s k f o r a v e t o at t h a t s t a g e . 9. I t h e r e f o r e a s k m y c o l l e a g u e s t o c o n s i d e r w h e t h e r we s h o u l d now a g r e e t o offer t h e U n i t e d S t a t e s G o v e r n m e n t t h e u s e of t h e f a c i l i t i e s at C h r i s t m a s I s l a n d for p a r t of t h e s e r i e s of a t m o s p h e r i c n u c l e a r t e s t s w h i c h t h e y m a y d e c i d e t o h o l d in 1962. S u c h an offer w o u l d b e m a d e on t h e r u n d e r s t a n d i n g t h a t : - (a)
A f o r m a l a g r e e m e n t m u s t f i r s t be concluded
on t h e f i n a n c i a l and a d m i n i s t r a t i v e a r r a n g e m e n t s
f o r t h e u s e of t h e s e f a c i l i t i e s .
(b)
The P r e s i d e n t would c o n s i d e r carefully and
consult the United Kingdom before taking a final
decision to r e s u m e t e s t s .
(c)
We w o u l d s u p p o r t w h a t e v e r d e c i s i o n P r e s i d e n t
Kennedy m a d e .
I t h i n k m y s e l f t h a t s u c h a n offer s h o u l d a l s o be m a d e c o n d i t i o n a l o n U n i t e d S t a t e s a c c e p t a n c e i n p r i n c i p l e of a W e s t e r n i n i t i a t i v e t o h a l t t h e n u c l e a r a r m s r a c e by a g r e e m e n t . 10.,
On t h i s b a s i s I b e l i e v e t h a t we c o u l d :
3
(a)
Defend a decision to bring C h r i s t m a s Island t o a s t a t e of r e a d i n e s s f o r r e n e w e d t e s t i n g , " a s a m a t t e r of p r u d e n t p l a n n i n g f o r t h e f u t u r e " , in t h e w o r d s of t h e B e r m u d a c o m m u n i q u e ,
(b)
Defend an e v e n t u a l U n i t e d S t a t e s d e c i s i o n t o h o l d t h e f u r t h e r s e r i e s of a t m o s p h e r i c t e s t s w h i c h t h e y have in m i n d a s n e c e s s a r y to m a i n t a i n the b a l a n c e of t h e d e t e r r e n t a n d w h i c h w o u l d t h e r e f o r e b e w i t h i n t h e t e r m s of t h e p u b l i c s t a t e m e n t s m a d e b y P r e s i d e n t K e n n e d y and m y s e l f on 1st N o v e m b e r a n d 31st O c t o b e r r e s p e c t i v e l y .
I-T.M.
A d m i r a l t y H o u s e , S . W. 1. 1st J a n u a r y , 1962.
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THIS D O C U M E N T IS T H E P R O P E R T Y O F H E R B R I T A N N I C 'MAJESTY'S G O V E R N M E N T
C . (62) 2
Copy N o .
g 3
3rd January, 1962
CABINET
ESTIMATES,
1962-63
MEMORANDUM BY THE C H I E F SECRETARY TO THE TREASURY AND PAYMASTER GENERAL
I can now put before the Cabinet a preview of the Estimates for 1962-63. 2. The Chancellor of the Exchequer with the authority of the Cabinet told Parliament on 25th July: " I intend to do my utmost to keep the increase [of Government Supply expenditure in 1962-63] to a level of not more than 2\ per cent, in real terms . . . that is to say about £125 million above the Estimates for 1961-62." 3. This undertaking was repeated in the course of the negotiations with the authorities of the International Monetary Fund that resulted in their agreeing to lend us £535 million, with which we were enabled to defend sterling.
Supplementaries 1961-62 4. The Supplementary Estimate of £78 million for agriculture was embarrassing, and raised questions about Government ability to control expenditure. The net outturn of expenditure in 1961-62 will probably be over £150 million above the Budget Estimate. This means that, in effect, we have had to use the proceeds of the 10 per cent, tax surcharge " regulator " to cover extra expenditure, whereas it was intended to disinflate the economy.
Estimates 1962-63 % 5. Our supporters in Parliament wish to see us curbing expenditure. In fact it is rising rapidly. As the Annex shows, the 1962-63 Estimates at present total £5,610 million. This includes an estimate of £50 million for reopening the 1962-63 general grant (mainly teachers' pay) and also assumes that the Colleges of Advanced Technology will not be taken over from the local authorities until April 1963. 6. The 1961-62 Estimates were £5,187 million. To that, for comparability, we must add £40 million because, in the new form of Estimates, teachers' and doctors' superannuation contributions are treated as an Exchequer Extra Receipt and not as an Appropriation-in-Aid. This gives £5,227 million. 7. The 1962-63 increase is therefore £383 million, or 7-3 per cent. The corresponding increase this time last year was £347 million, and we had to increase the health stamp and impose health charges so as to reduce it to £280 million. 8. In The Queen's Speech, we again emphasised our purpose of keeping public expenditure within limits justified by the national resources. The prospective increase of 7 - 3 per cent in supply expenditure in fact compares with a prospective increase of about 5 per cent, (in money terms) in the gross national product. 60197
9.
The following are the chief increases:
Defence Budget
1962-63 Estimate £ million 1,721
Overseas Aid Programme Assistance to Industry British Transport Commission Subsidy Agricultural Support ...
95 59 150 305
General and Rate Deficiency Grants ... Health Service Roads Ministry of Aviation " F l o a t " for Purchasing
720 661 154 27
Increase Over 1961-62 £ million + 6 S (not including rise in Forces pay) + 12 + 14 +47 -f38 (£40 million below 1961-62 outturn) 4-87 (mainly education) +2S + 18 + 18
The 21 Per Cent. Pledge 10. The Budget Estimate for 1961-62 (as modified in paragraph 6) was £5,227 million. The equivalent of this at 1962-63 levels of pay and prices would be £5,366 million. 11. The Estimates for 1962-63 at £5,610 million therefore show a rise of £244 million on this figure, an increase of A\ per cent., whereas the Chancellor^ pledge was £125 million or 2\ per cent, (now equivalent to £134 million). Even if we take the higher figure of £134 million, there is £110 million to get off. 12. Abolition of the welfare milk subsidy for families with less than four children will save £19 million. Increasing the school meals price to Is. 6d. will save £17 million. A minimum determination in the farm price review will save, say, £15 million. These three measures would reduce the gap from £110 million to £59 million. The increase on 1961-62 will still be over %\ per cent. Obviously we must get every pound off the Estimates that we can. We have still got a long way farther to go to honour the pledge we have given. H. B.
Treasury Chambers, S.W. 1,
2nd January, 1962.
ANNEX
S U M M A R Y O F ESTIMATES
£ million 1961-62 Budget Estimates
1962-63 Estimates as at 21st December
1,675
1,741
170
189
SUPPORT OF EXTERNAL POLICY—
A.
Defence...
B.
Civil Operations Overseas
...
OTHER CIVIL EXPENDITURE—
D.
Industry and Transport
168
228
E.
Agriculture
300
340
F.
Civil Science
119
117
G.
Arts
8
8
633
720
...
H. General and Rate Deficiency Grants to Local Authorities ... I.
Education
123*
133
J.
Health and Welfare
731*
768
K.
Other Local Services
248
262
L.
Law and Order
103
109
M.
. Benefits and Assistance
613
615
N.
Central Administration
284
309
P.
Miscellaneous Services TOTAL (ORDINARY SUPPLY)
52
71
5,227
5,610
* After adjustment for different treatment of certain receipts.
January
1962.
THIS D O C U M E N T IS T H E P R O P E R T Y O F H E R B R I T A N N I C MAJESTY'S G O V E R N M E N T
Printed for the Cabinet.
January 1962
C. (62) 3 4th January,
Copy N o .
g g
1962
CABINET
PUBLIC E X P E N D I T U R E , 1962-63 TO
1965-66
MEMORANDUM BY THE C H I E F SECRETARY TO THE TREASURY AND PAYMASTER GENERAL
We are faced with two critical problems in public expenditure: (i) The immediate problem of 1962-63, to cent, increase " undertaking which gave on 25th July. (ii) The longer-term problem of bringing control, and into reasonable relation
honour the " not more than 2\ per the Chancellor of the Exchequer the growth of expenditure under with our prospective resources.
2. We need to solve both within the next few weeks. The total of the 1962-63 Estimates has to be published with the Vote on Account in the middle of February, and we shall be expected to show at that time how it squares with our undertaking. In his 1961 Budget speech the Chancellor spoke of a five-year public expenditure plan, and he will be expected to expound it in his 1962 Budget. If we overrun the pledged limit for 1962-63 to any significant extent, the only possible defence to Parliament and public opinion (including our creditors) is that the momentum was too strong to be brought under effective control in six months but that we have taken unmistakable steps to do so—steps of which we can give evidence at the time of the Vote on Account 3. This paper is to set out, as best I can, what is involved in this. Annex A describes the background, starting with the Cabinet decision last March for the preparation of a long-term expenditure plan: summarising the report by officials (" Public Expenditure and Resources, 1961-62 to 1965-66 ") which was submitted to the Cabinet in June under C. (61) 88: and describing the action since. 4. First, I must say that the basic assumptions of the Report were generally regarded as optimistic (Annex A, paragraphs 10-12). It assumed a solution of the balance of payments problem (none is yet in sight), a substantial increase compared with the last decade in the rate of growth of national productivity, and willingness by the public to reduce its rate of increase of consumption. Little has happened since to make these look more realistic. We face a severe economic struggle throughout the next five years; a struggle in which our oversea creditors will be watching our performance closely. 5. Secondly, even on these favourable assumptions the Report was not able to make recommendations that would contain public expenditure within the Cabinet's desired 42 - 5 per cent, of gross national product (G.N.P.). It was reckoned that a growth of £1,000 million in public expenditure in the five years would be compatible with the desideratum (or £800 million if no more than a 2 per cent, rate of increase of productivity could be assumed). The proposals provided £1,100 million increase (Annex A, paragraph 18). CONFIDENTIAL 60207
B
6.
Thirdly, we are still far short of carrying out even these proposals:
Nationalised industries
...
Assistance to industry
...
Agriculture
Defence Education
Health Service
Public
service
investment
Nutritional services Administrative and minor savings Other services
The British Transport Commission and the National Coal Board are developing worse than assumed. Criteria are being worked out saving secured on Cunarder. Proposal was to contain cost of support and services within the 1961-62 Estimate of £277 million. But 1962-63 Estimate is over £40 million above that, and the commitment is still open-ended. The Minister of Defence is, I know, consider ing a plan to accord with the proposed limit. Proposal was to keep growth of current expenditure down to 3 per cent, per annum. The Minister wishes it to continue to grow at over A\ per cent, per annum. Proposal has been substantially accepted by Health Ministers: rate of increase to be kept to 2\ per cent, per annum. If my proposal in C. (61) 218 is accepted, to pare down the rate of growth to 10-15 per cent., public investment will still be about £65 million higher in 1965-66 than was allowed in the June proposals. We must get at least £35 million here: a continuing saving. £15 million secured: much of it a continuing saving. Other things (e.g., oversea aid) tend to be running higher than was provided in the June proposals.
7. The upshot is that even when we have got a long-term defence budget and a public service investment programme within the proposed limits, and have made the saving on nutritional services, we are still likely to be about £200 million higher than the June proposals for 1965-66, which were themselves £100 million higher than what would have maintained the 42-5 per cent, ratio, and £300 million higher than would have maintained the 42-5 per cent, ratio at the last decade's rate of increase of productivity. What I am trying to do is to stop the rate of growth of public expenditure from getting altogether out of hand, not to pin it to an arbitrary ratio. 8. In order to show to the world that we have an effective long-term policy for containing the growth of public expenditure and keeping it in a tolerable relationship with the prospective growth of resources, we need to put ourselves in a position to announce: (i) For education, health services and public service investment (including roads, housing, etc.), and defence (if security conditions permit), the rates of growth of expenditure on each of which we are basing our plans for the next five years. (ii) For agriculture and assistance to nationalised and private industry and oversea aid, the policies which we are carrying out for setting limits to the expenditure. (iii) F o r the rest, that we are working on similar lines (pensions is rather a special case). (iv) The aggregate effect of all this in relation to the prospective growth of national resources, 9. This is in my view the minimum which could be regarded as carrying weight. When the work of the National Economic Development Council gets
going, it will probably be necessary to publish much more comprehensive statements. In all this, the short-term and the long-term actions reinforce each other: the measures taken to carry out the " 2\ per cent, undertaking " will contribute to the long-term objective, and carrying out the long-term containment of public expenditure will help the annual Estimates. 10. If we do not change our policies in such a way as to restrain the growth ol expenditure, we shall be faced with the same experience year by year: the Estimates coming in with increases of 7 to 8 per cent, or more, as they have done in each of the last four years, and the ratio of Supply expenditure to G.N.P. (and also of public expenditure as a whole) continually rising. 11. This is brought out clearly in Annex B,. which for the decade since 1951 illustrates the growth of Supply expenditure and also the interesting change of composition in the early years: it was the measures taken to contain defence expenditure after Korea that permitted a great expansion of social expenditure consistently with falling taxation. Now there are no levelled-out programmes. This means that we have to settle priority between the rates of expansion, and decide which are to go forward faster than others, and by how much. Faster expansion for one must mean slower expansion for all others. 12. Annex C brings out the same point for public service investment, which (other than public housing) doubled between 1955-56 and 1962-63: in this case it was the decline in public housing that made room first for growth in the next largest item (education) and then for the gradual build-up of the roads and hospital and local authority programmes, which had till then been held back to give room first for the houses and then for the schools. But here again there are now no declining programmes. 13. I am afraid that these facts are inescapable and that, if we pretend they do not exist, events will take charge, with a repetition of the crises and frustrations. I do not myself believe that a continuing increase of taxation offers an acceptable way out: the public will not reduce their consumption but will reduce their saving, and industry will suffer because of the disincentive to risk-taking that a rising tax burden involves. Though I myself cannot see a solution to our problems in increasing taxation, yet if we do believe that that is preferable to hard economies we should face that frankly, and determine how far we can increase it, and then control our expenditure to keep us within that limit. 14. But this is not only a question of taxes. As the public services grow, they take more and more of the real resources of the community. It is of note that the public sector employs half the people with good honours degrees now; and as the university and education and health services grow and also the Government financed scientific establishments, an increasing proportion of the nation's best brain-power is drawn there instead of into industry and trade. For a nation which must export to live, there comes obviously a danger-point. 15. Not for one moment would I disparage the national and social advantages which flow from much of our public expenditure. I am convinced that it must expand. But this is a question of degree and of timing. If we think that the great bulk of the extra expenditure proposed will help us to solve the critical economic problems of the next five years, we are deceiving ourselves. Education expenditure is in itself a huge investment already: so is health expenditure: so are others. New capital expenditure on education now being planned will not result in any significant change in the skill and application of the labour force before the 1970's; and many of our growing expenditures are much less closely related than education to our economic potential. The truth is that a great many of our forms of public expenditure have long-term economic advantages for Britain—but do not let us imagine that to carry them out is a practical contribution to solving our economic problem of the next five years. 16. In the expenditure decisions, both short term and long term, which we have to take in the next few weeks, we must keep our priorities straight. The central problem of the next five years is to set our economy right, and to achieve a better performance in real growth and solvency. We must take these expenditure decisions in a way that treats this five-year task as the first objective. Otherwise we shall not get through to the second five years. H. B. Treasury Chambers, S.W.1,
3rd January, 1962.
60207
ANNEX A
T H E L O N G - T E R M PUBLIC S E C T O R
PLAN
The Course of Events At the end of March, the Cabinet (C.C. (61) 19th Conclusions) invited the Chancellor of the Exchequer to arrange for officials to work out a plan for the development of the public sector and its expenditure over the next four years, on the assumption that the ratio of public expenditure to the gross national product should remain at 42-5 per cent., to examine methods of financing such expenditure, and to report on the implications for economic growth, taxation and the balance of payments (C.C. (61) 19th Conclusions, Minute 4). 2.
In his Budget speech, the Chancellor said:
" I have recently set in hand a study of the whole problem of public expenditure in relation to the prospective future growth of our resources for a period of five years ahead. . . . The object of carrying out the study which I have just mentioned is t o see how we can best keep public expenditure in future years in proper relationship to the growth of our national product." 3. The report by the Treasury to the Chancellor of the Exchequer, which had been extensively considered by the 24-Department Public Expenditure Survey Committee, entitled " Public Expenditure and Resources, 1961-62 to 1965-66 ", was submitted to the Cabinet by the Chancellor at the end of June under C. (61) 88. 4. The report of the Plowden Committee on Control of Public Expenditure (Cmnd. 1432) was published early in July. The main recommendation was t h a t : Regular surveys should be made of public expenditure as a whole, over a period of years ahead, and in relation to prospective resources; decisions involving substantial future expenditure should be taken in the light of these surveys. 5. The Cabinet discussions and decisions in July covered both long-term and short-term elements of public expenditure. The specific undertaking about the future level of Government expenditure in the Chancellor^ statement on 25th July was related to the year 1962-63, presented as part of the process of containing future public expenditure, and in this statement and on 26th July the Chancellor put great weight on bringing public expenditure into a proper relationship with the growth of resources as the Government^ principal contribution to economic growth. 6. The Chancellor made proposals in C. (61) 123 for further work on the preparation of a public expenditure plan u p to 1965-66, and these were approved by the Cabinet on 1st August (C.C. (61) 46th Conclusions, Minute 5). 7. The Queen's Speech emphasised the Government^ purpose of keeping public expenditure within limits justified by the national resources. 8. Work has proceeded since July in the Public Expenditure Survey Committee and elsewhere in accordance with the decisions of 1st August. The memorandum by the Chief Secretary, Treasury, C. (61) 174 on administrative and minor policy savings—primarily directed towards 1962-63 but of long-term significance too—was approved by the Cabinet on 9th November (C.C. (61) 61st Conclusions, Minute 2). The Long-Term Expenditure Report 9. The report began by an examination of the prospective growth of economic resources in the period to 1965-66, and the future development of the economy. It was decided as a result of this examination to work on the basis of an increase of output (gross domestic product, G.D.P.) per worker of 2\ per cent, per annum, and of working population by \ per cent., i.e., an increase of 3 per cent, per annum in G.D.P.
10. It was the universal view that this pattern was an optimistic one, for the following reasons: (i) It implied that the balance of payments problem would be solved during these four years despite continuing increases in prices and costs, and by means which permit rapid expansion of the G.D.P. The assumption was an increase of nearly 6 per cent, in the average annual rate of expansion of exports of goods'—the view of the Board of Trade was that this average could not be expected to be more than 3£ per cent. (ii) The rate of increase of 2\ per cent, per annum in the G.D.P. per worker would require a faster pace than the average of about 2 per cent, per annum in the previous decade. (iii) To make room for the exports and private investment required to create and sustain the economic growth which was postulated, and the public expenditure at 42-1 per cent, of G.N.P., it would be necessary for the public to be willing to consume a smaller proportion of its extra income than it had done before (2 -1 per cent, increase per annum of consumption per head compared with 2-8 per cent, per annum in 1952-60). 11. On all these scores the Report was held to be optimistic: the Treasury took the view that it would be wrong to make a " plan " on a lower rate of economic growth (for this would itself create its own inconsistencies and difficulties). The right course, the Report said, was to try to conquer the balance of payments limitation in the next four or five years rather than to try to limit the economy to conform with it. 12. This led to the following conclusions: (a) If public expenditure is to be planned on the basis of 2\ per cent, annual average rate of growth of G.D.P. per worker, this would mean that all governmental policies would have to be directed to strengthen the competitiveness of the economy—the common essential condition for growth and solvency. (b) In particular, the development of public expenditure, both in size and in composition, should be such as to support this aim so far as practicable—the power of the purse may well be the most powerful weapon at the Governments disposal for this purpose. (c) The prospects of achieving this objective would be greatly improved if the average rate of increase of wages and salaries could be held to no more than the growth of G.D.P. per worker. . 13. The Report then went on to consider the shape and impact of public expenditure, expounding the layout, the way in which it had developed in the 1950s (with the reorientation of public expenditure away from defence and housing and towards oversea aid, assistance to industry and science, transport (road and rail), education and pensions). 14. It showed the importance for the G.N.P. of the efficiency with which the public sector (employing nearly 6 million people and carrying out over 40 per cent, of the nation's investment) conducts its business: the first element in any plan for the public sector and its expenditure, the Report said, was to build up the efficiency of the resources engaged in the public sector. 15. The Report then examined the impact of public expenditure on the productivity and competitive power of the private sector—through the framework of services which it provides, through the amount and nature of the resources which it pre-empts from the total national resources, and through the effect of the direction of public expenditure on the distribution of resources in the private sector, and on the extent to which it encourages labour and capital to go where they will yield the best return. These were analysed one by one, with particular reference to the features of the layout of public expenditure which had been contributory factors in the indifferent competitive power of the national economy in recent years. 16. Against this. background of the prospective growth of the national resources, and of the impact of public expenditure upon the rate of growth, the Report proceeded to examine the future course of each main block of public CONFIDENTIAL 60207
B 3
expenditure. To contain public expenditure within the Cabinet's desideratum of 42^ per cent, of the G.N.P., on the optimistic figure of the growth of G.N.P., it was reckoned to be necessary to limit the increase from 1961-62 to 1965-66 within about £1,000 million (at the prices of the first quarter of 1961). 17. On present policies, the increase would far exceed £1,000 million. It was impossible to give a figure, for some of the present policies (e.g., agricultural subsidies) are open-ended commitments, and it was impossible rationally to predict what they would be in five years' time. Experience has shown, moreover, that " on present policies " there is a continuous flow of new spending proposals so that any forecast based on what is now known is bound to be greatly exceeded. It seemed unrealistic, therefore, to approach the problem by taking the programmes one by one, making a prediction of what would happen to each " on present policies ", and then proposing adjustments to bring the aggregate increase within the £1,000 million. 18. Instead, a policy was suggested for each main block of expenditure, with the intention of making up a set of policies that would in the end result in expenditures which would not in the aggregate exceed the additional £1,000 million. It was found that the momentum of public expenditure was so powerful that it was impossible, even with the optimistic figure of growth of G.N.P., to make a practical plan which conformed to the 42-1- per cent. Proposals were put forward which, with an appropriate allowance for contingencies, would involve increases of about £1,100 million instead of the £1,000 million consistent with the 42-1 per cent. 19. above.
This failure put further emphasis on the conclusions in paragraph 12
20. The proposals were in some cases for quantitative limits for 1965-66 and in others for changes in policy in qualitative terms. The magnitudes were shown in the following table (the figures are those given in the Report of the Public Expenditure Survey Committee: in some cases, e.g., agriculture and aid, the 1961-62 figures have since changed): 1961-62 £ million Quantitative limits (large items) Defence budget Civil investment Local education (expenditure for general grantX ) Hospital services^) Local health and welfare services( ) National insurance and war pensions Family allowances 1
l
Total Other expenditures Oversea aid programme Assistance to industry (public and private) Agricultural support and services Executive Council services, etc. Other expenditures( ) Debt interest ... Miscellaneous, adjustments, etc. Contingency allowance 2
Total public expenditure
...
Proposed increase (at 1st quarter, 1961 pay and prices) £ million
1,680 1,692 770 508 108 1,266 134
125 (258) 100 40 13 91 7
6,158
634
108") 247 j 277 ^2,687 234 1,741 J 1,225\ 210/
85
135 250
10,280
1,104
x
( ) Current expenditure: capital is included in civil investment. ( ) These include the Atomic Energy Authority, the Research Councils, universities, housing subsidies, road maintenance, police, national assistance, central and local government administration and a large number of smaller services. Provision has been made for these on a basis of restraint. 2
21. The Treasury proposals in the Report for the main items of expenditure were as follows: (i) The policy outlined in the White Paper on the Economic and Financial Obligations of the Nationalised Industries (Cmnd. 1337) should be energetically pursued.
(ii) Stringent criteria should be required to justify proposals for Government assistance to private industry. Proposals of this kind involving some significant departure should be examined inter-departmentally before a decision is taken. (iii) Whatever measures are necessary should be taken to contain the annual bill for agricultural support and services within the general area of the estimated cost for 1961-62—namely, £277 million. (iv) The defence budget for 1965-66 should not exceed the estimated level for 1961-62 by more than £125 million at 1st quarter (say February), 1961 prices, with special reference to reducing direct oversea military expenditure and demands on high-quality research and industrial effort. (v) The rate of growth of local authorities' current expenditure on education should be limited to 3 per cent, per annum, which would permit an increase by 1965-66 of £100 million at February 1961 prices over the estimated level of expenditure in 1961-62. (vi) The rate of growth of hospital running costs should be limited to 2 per cent. per annum, which would permit an increase by 1965-66 of £40 million at February 1961 prices over the estimated level of expenditure in 19.61-62. (vii) The rate of growth of expenditure on the local health services should not exceed 2 per cent, per annum, giving an increase by 1965-66 of £6^ million at February 1961 prices over the estimated level of expenditure in 1961-62: expenditure on the local welfare services in 1965-66 should not exceed by more than £6^ million at February 1961 prices the estimated level of expenditure in 1961-62. (viii) There should be no widening of the scope of National Insurance and other benefits and assistance. (It was implied in the report that the rates of benefit would, in accordance with present Government policy, rise broadly in line with earnings.) 22. There was reference to the Annual Review of Public Investment, showing its relevance to the long-term public expenditure plan, both as direct expenditure (a level of £1,950 million of public investment was allowed for 1965-66 in the table shown above, an increase of £200 million over 1961-62) and because of its indirect effect upon the growth of current expenditure. Subsequent Actiosi 23. The following action has been taken on the proposals set out in paragraph 21 above. ----- - - 24. Nationalised industries.—On 26th July, the Chancellor of the Exchequer announced the Government^ policy of leaving these industries as much freedom and responsibility as possible in fixing their prices; and of allowing the industries the investment which is agreed to be required for attaining their financial targets and providing essential supplies and services. H e said that the White Paper policy would lead to more effective concentration upon productive:efficiency.in..the use both of labour and capital; and that as a result of increased efficiency and higher earnings the calls on Exchequer finance were expected to be progressively and substantially reduced over the next five years. . 25. The negotiation of financial targets with the gas arid electricity industries has proceeded satisfactorily; and the Post Office charges have been raised to prevent an additional drain on the Exchequer. But for the coal industry an unsatisfactory position is being revealed, and the Exchequer is heavily and dangerously at risk. -' : v
. 26. The deficit of the,British Transport Commission has again.increased this year and there seems no early prospect of the railways managing without a substantial Exchequer subsidy. The extent of the assistance required over the next few years, will depend to a substantial degree on the efforts, of the new management to increase the efficiency of the industry and to rationalise its size. The Commission have put in hand a. comprehensive series of traffic studies, and the new Transport Bill will give the railways a substantial measure of commercial freedom, notably in fares and charges'. -' v
27. Assistance to Industry.—On 26th July, the Chancellor said that new Commitments for assistance could be justified only if they can be shown to make important contributions to competitiveness and national efficiency which can be secured in no other way; and that if any new proposals came forward the Government would apply this criterion stringently. He made it clear that the Government would continue to use their powers vigorously to deal with localities in which any serious lack of employment opportunities arose. 28. The Public Expenditure Survey Committee are preparing a report on the criteria for such assistance in accordance with the Cabinet decision of 1st August referred to above. Meanwhile, the Cunard (Q.3) project has been abandoned, with a probable saving of £15 million loan and a grant of over £3 million. 29. Agriculture.—On 25th July the Chancellor announced that the Government would have to look critically at the level of agricultural support during the 1962 Review. Meanwhile the cost in 1961-62, put at £277 million in the Report of the Public Expenditure Survey Committee, is expected to rise to about £360 million. 30. Defence.-The proposed policy was incorporated in the Prime Ministers Directive. In addition, discussions have started with Germany about some relief on overseas costs there. 31. Education.—This is now before Ministers. The difference between the 3 per cent, rate of growth in local authority current expenditure in the proposals and the increase of about A\ per cent, implicit in present policy is about £50 million a year of current expenditure. 32. National Health Service-The Cabinet decided (C.C. (61) 46th Conclusions, Minute 5) that the growth of current expenditure on the hospital service, the Executive Council services, and the local health and welfare services will for the next four years be planned within a financial limit for Great Britain of an increase of £80 million (at the pay and prices of the first quarter of 1961) over the estimated figure of £850 million for 1961-62: i.e., an increase of about 2\ per cent, per annum in real terms over the whole of Health Service expenditure. Within the total the Health Ministers would have some flexibility between the various elements of Health Service expenditure and (within moderate amounts) take account of savings achieved in it. The application of this decision is subject to consultation between the Health Departments and the Treasury. 33.
Benefits.—No
action involved.
34. Public Investment.—Decisions in 1962-63 were taken by the Cabinet (C.C. (61) 46th Conclusions, Minute 5), and a firm five-year road programme was decided upon and announced. The report from the Public Expenditure Survey Committee on investment in 1963-64, 1964-65 and 1965-66, was circulated by the Chief Secretary, Treasury, to the Cabinet and his memorandum C. (61) 218. 35. The Departments' proposals are in the aggregate £2,000 million for 1963-64, £2,040 million in 1964-65 and £2,065 million in 1965-66. The proposals for public expenditure in the Report were based upon a figure of £1,950 million in 1965-66. 36. Administrative and Minor Policy Savings.—The Cabinet have approved the proposals in a report by the Public Expenditure Survey Committee, circulated by the Chief Secretary, Treasury, with C. (61) 174. This provides for savings of £14f million in 1962-63, but some of this saving will be permanent, and will reduce the long-term aggregate of expenditure. 37. Nutritional Services.—The savings of £36 million a year which would result from the abolition of the welfare milk subsidy for families of less than four children and the increase in the price of school meals to Is. 6d., following from the discussion of C. (61) 209, would be a continuing saving. January
1962.
ANNEX B
SUPPLY EXPENDITURE
Expend i t u r e 1951-52
1953-54
1952-53
I 195K-55 \ 1955-56
1956-57
1959-60
1957-58 ! 1958-59
Estimates ; State of t o date 1 Play 1961-62 1 1962-63 I
Budget Estimates 1961-62
Total Estimates 1960-61
!1
1,656
1,656
12.9
139
151
155
84
1 98
107
107
115
591
597
' 673
644
663
710
79
84
88
i 93
95
95
91
402
446
485
173
171
191
194
209
78
85
105
108
512
605
633
633
720
292
327
306
341
293
319
336
340
418
382
201
101
76
66
68
66
72
78
105
105
136
50
5.1
56
63
68
84
105
121
238
248
275
318
5
5
51
60
78
103
99
106
107
'
94
94
I
633
633
635
!
77
80
80
1,160
1,400
1,374
1,454
1,413
1,535
1,456
1,463
1,495
Commonwealth and F o r e i g n
96
97
85
106
117
93
94
102
107
Home, Law and Order.
44
49
52
46
61
67
80
82
404
449
433
457
581
584
60
64
72
80
74
75
248
267
283
313
346
55
63
68
77
567
361
386
293
271
fife) Transport
51
!?) S c i e n c e
5
( a) Defence
Health and W e l f a r e Housing lib) Central E d u c a t i o n S e r v i c e s (l.) Exchequer G-rants t o L o c a l Revenues ( b) A g r i c u l t u r e , F i s h e r i e s and Food m.) Trade, I n d u s t r y and Labour
B e n e f i t s and A s s i s t a n c e Revenue C o l l e c t i o n 1
Miscellaneous
362
380
39
42 173
145 TOTALS
3,529
5,669
;
496
396
406
421
441
465
549
582
44
46
49
55-
58
63
68
160
3,611
169
179 5,663
3,745
192
4,044
210
195
606 i
4,525
7
3
!
4,989*
i ! 1 S
25.7
23.8
22.7
21.7
21.1
'. -
21.1
i 5,337*
(5,187)
21.1
21.3
22.0
!
ft) The i n c r e a s e i n 1959-60 and t h e r e a f t e r i n e x p e n d i t u r e on Exchequer Grants t o L o c a l Revenues i s t h e r e s u l t o f t h e B i n t r o d u c t i o n o f t h e g e n e r a l £ r a n t s y s t e m . T h i s i n c r e a s e i s r e f l e c t e d i n c e r t a i n r e d u c t i o n s i n o t h e r groups 11 n o t a b l y C e n t r a l E d u c a t i o n S e r v i c e s . m) The drop i n e x p e n d i t u r e i n 1952-53 t a k e s a c c o u n t o f t h e r e d u c t i o n i n f o o d s u b s i d i e s i n t r o d u c e d i n t h e Budget o f t h a t y e a r stockpiling t h e d e f i c i t , o f t h e B r i t i s h T r a n s p o r t Commission
PS.v.i962
22,4
(21.9) 1
* estimated
J) The r i s e i n 1954-55 and t h e r e a f t e r i s due t * t h e commencement o f p r o v i s i o n f a r Atomic Energy
(5,610)
!
I
1 ) The r i s e i n 1960-61 and t h e r e a f t e r i s due t * t h e t r a n s f e r t o V o t e s o f p r o v i s i o n fir
1
i
(.2.) Expenditure i s on an e s t i m a t e d b a s i s
ill) The h i g h e r l e v e l o f e x p e n d i t u r e i n t h e e a r l i e r y e a r s i s due mainly t o
247
227
225
I
26.8
1,721
\
1
T o t a l as P e r c e n t a g e o f G.K.P.
'
*
221
204
4,300
4,155
1,629
out-turn
j
(22.4)
[ 1956/57
I1957/58
:1958/59
1959/60
1960/61
1961/62
1962/63!
ACTUAL PRICES
U n i v e r s i t y Grants Committee Education Housing Water/Sew.
Forecast Approved Out-turn Totals Cmnd. 1522
12
19
32
58
73
83
6
8
11
15
20
86
110
125
120
340
329
305
269
57
62
64
-
"
I I,R1
DEPARTMEN' BIDS Report of t h e p u b l i c Expenditure Survey Committee ( C . ( 6 l ) 218).
98
114
128(0
138(0
147(0
20
25
27
34(2)
40(2)
44(2)
118
122
134
142
151(3)
152(3)
154(3)
287
280
273
272
299
295
290
'
1
Hospitals
63
76
95
106
117
117
117
22
26
26
26
43
51 (4)
57(4)
64(4)
5
5
5
7
11
13
18
16
17
22
24
26
30
38 -
108
Other
106
Total other
than Housing
110
128
150
191
200
210
209
215
1,016
1,035
1,058
717
740
768
631
658
662
665
735
774
872
926
291
329
357
396
448
494
599
654 '
( 0 These f i g u r e s form p a r t o f the f i v e y e a r road programme agreed i n J u l y 1961; f i g u r e o f £205 m i l l i o n o r i g i n a l l y put forward by t h e Transport M i n i s t e r s .
t h e f i g u r e o f £147 m i l l i o n f o r 1965/66 compares w i t h a'
(2)
The Government have announced t h e i r i n t e n t i o n of a u t h o r i s i n g new b u i l d i n g work a t u n i v e r s i t i e s t o t h e v a l u e o f £25 m i l l i o n i n each of
t h e y e a r s 1962 and 1963. The U n i v e r s i t y Grants Committee have b e e n a u t h o r i s e d t o i n v i t e u n i v e r s i t i e s t o make b u i l d i n g p l a n s on t h e
b a s i s of s t a r t s of £30 m i l l i o n i n each o f t h e y e a r s 1964 and 1965; r a t e o f implementation n o t y e t d e c i d e d .
(3)
On t h e b a s i s o f an annual r a t e o f £120,5 m i l l i o n f o r e d u c a t i o n i n England and ffales i n 1963/64 - 1965/66 t h e s e f i g u r e s would be
£136 m i l l i o n , £136 m i l l i o n and £135 m i l l i o n .
Based on f i g u r e s agreed w i t h t h e Health M i n i s t e r s f o r t h e purpose o f making b u i l d i n g p l a n s : r a t e o f implementation of p l a n s has n o t
y e t been d e c i d e d . Janua:
1962
i
P
z
Ui
O Z 0
101 -
TOTAL
mi ^
-
Local H e a l t h
''
1965/66
MMICH, 1961 FRICES
OUT-TURN
Roads
1963/64 I 1964/65 ;'l
u
THIS D O C U M E N T IS T H E P R O P E R T Y OF H E R B R I T A N N I C M A J E S T V S
Printed for the Cabinet.
January
1962
C. (62) 4 4th January,
GOVERNMENT
Copy N o .
57
1962
CABINET
EDUCATIONAL
EXPENDITURE
MEMORANDUM BY THE C H I E F SECRETARY TO THE TREASURY AND PAYMASTER GENERAL
I would like to reply to the memorandum by the Minister of Education (C. (61) 221). 2. This is not a discussion about education as such, for no one disputes the value of education. It is about the way in which we are going to lay out our available national resources. 3. I attach a table of educational investment up to 1965-66, setting out the programme to which the Minister wishes to hold, and an alternative proposal which I suggest is more in line with our available resources. My proposal shows an annual average investment of £116 million in 1960-61, 1961-62 and, 1962-63 and of £121-1- million in 1963-64, 1964-65 and 1965-66. This cannot be called a " cut " in education investment. , 4. My proposal would provide for: (i) A primary and secondary schools programme of " starts " o f £55 million a year in 1962-63 onwards. This would give the £300 million " starts " envisaged in the 1958 White Paper (Cmnd. 604) by, say, July 1965, instead of March 1965 which was the original intention. It is of course for the Minister to say how this would be best divided between the various purposes. But it should provide, with the minor works, the equivalent of something like 250,000 new places a year for a school population of nearly 7 million which is not in the aggregate rising significantly, although of course shifts of population are taking place. (ii) In the field of further education, " starts " in 1962-63 and subsequent years at £15 million a year. This was the rate indicated by the Ministry as the commitment for " starts " in 1962-63 and 1963-64, in its annual report issued in July 1961. ' " (hi) Teacher training college " starts " slightly phased o u t - £ 4 6 million in the six years from 1960-61, instead of £50 million according to the Ministers programme. This could not affect the supply of teachers even marginally before the 1970s. (iv) Other work.—A slight reduction on the Minister^ programme. A i v
:
A
Vi
iJ
r : : ;
5. In total, my proposal would produce an average for the three years 1963-64, 1964-65 and 1965-66 above the present high level of education investment, and in volume probably about 20 per cent, above that of the second half of the 1950s. 6. T o do this in the way I propose would involve some postponement of " starts " in 1962-63', as compared with the authorisations for 1962-63 which were provisionally notified to the local authorities in July 1960. I do not think the Minister would contend that these are " committed " in the sense that there is a definite Government obligation to permit every one of these to go forward in 1962-63. Indeed, it would be manifestly absurd for the Government to make so definite a commitment several years before the bulk of the expenditure would be 60205
incurred. Since July 1960 we have run into economic difficulties, and I do not think that educational building can, as it were, contract out of the immediate measures needed to bring us through. 7. I fully realise that it is unpleasant for the Minister to have to say to some local authorities that they must postpone for some months some of the projects which he hoped in July 1960 that they would be able to start in 1962-63. For schools and further education and teacher training, it would altogether be a postponement of " s t a r t s " amounting to £12 million out of £88 million which it had been hoped it would be possible to start in 1962-63. ^ .,, v
;
8. Consistently with the three-year total which I am proposing in fact it would be possible to let the 1962-63' authorisations remain unaltered and thus avoid that particular difficulty. But this would involve much larger adjustments later, and I would not recommend that course. 9. T o summarise: (i) My proposal does not call for any breach of a Government commitment for 1962-635 even if it does means telling some local authorities that they could not go ahead quite as fast as had been hoped. (ii) This is not a " c u t " in educational investment. On my proposal it will be higher, not lower, than now. (iii) I do not think the Minister will dispute that, given the need, it would be possible to frame a sensible educational development programme on these lines. (iv) The need arises because we cannot afford in the next five years a greater increase in the already high figure of educational investment, given the claims for roads, hospitals, universities, etc., which had been held back in the 1950s, and thus helped to make possible the big education programme. I am asking all Ministers to play their part and to co-operate in the all-round effort required to get through these next five years, and there are difficult decisions to be taken; I am in no sense singling out education. (v) There is no escaping the fact that the rapid growth in educational current expenditure is one of the very largest elements in the rise in public expenditure of all kinds, and it is materially affected by the size of the education investment programme. (vi) In my judgment, my proposal is the maximum which we have any reasonable chance of sustaining, unless we are prepared to make special room for education by imposing upon other programmes downward changes of dimensions which my colleagues have not begun to consider. H. B.
Treasury Chambers, S.W, 1,
3rd January, 1962.
SECRET
3
Education Investment (England and Wales)
£ million 1960-61 Primary and Secondary Schools Starts (programme) (proposed) W o r k done (proposed) Further Education (inc. Agriculture) Starts (programme) (proposed) W o r k done (proposed) Teacher Training Starts (programme) (proposed)
1961-62
1962-63
1963-64
1964-65
1965-66
51-5 57-2*
64-2 64-2
65-3 5 5 0
66-3 550
66-4 5 5 0
7 0 0 55-0
44-7*
51-3
55-2
57-4
55-9
55-1
16-9 17-9*
16-8 16-8
16-8 15-7
16-8 15-7
2 0 0 15-7
22-5 15-7
15-8*
161
16-8
16-3
161
15-8
16-5 17-0*
9 0 9 0
6 0 5 0
6-0 5 0
6-5 5 0
6-0 5 0
3-8*
8-4
9-8
7-4
5-4
4-8
Other W o r k done (programme) ... (proposed)
18-4 20-2*
17-7 17-7
16-3 16-3
18-3 17-1
18-4 17-4
18-6 17-6
Total Building W o r k done (programme) ... (proposed)
86-2 84-5*
93-5 93-5
100-6 98 1
107-0 98-2
108-2 94-8
110-8 93-3
Non-building W o r k done (programme) ... (proposed)
23-4 23-4*
23-2 23-2
24-8 24-6
27-6 26-6
28-2 2 6 0
28-4 25-3
109-6 107-9*
116-7 116-7
125-4 122-7
134-6 124-8
136-4 120-8
139-2 118-6
W o r k done (proposed)
TOTAL (programme)
(proposed)
V
Average 1 1 5 - 8 * N o t proposed but actual
January 1962
i
V
Average 1 2 1 - 4
THIS D O C U M E N T IS T H E P R O P E R T Y O F H E R B R I T A N N I C M A J E S T Y ^
Printed for the Cabinet.
January 1962
C. (62) 5 '.. 4th January, 1962
GOVERNMENT
* -
Copy N o .
55
CABINET
E D U C A T I O N POLICY MEMORANDUM BY THE MINISTER OF EDUCATION
The Government are committed to a series of advances in education for most of which timetables have been announced. We have said we would eliminate oversize classes as first priority, reorganise all-age schools and steadily replace slum schools, and expand higher education on a great scale. These and other commitments were calculated to require an increase in educational expenditure over the next four years of 4-6 per cent, a year—a figure which was compared with the forecast of 2\ per cent, increase a year in the Gross Domestic Product. In C. (61) 88 I was asked to keep educational expenditure within an increase of 3 per cent, a year. Since this slow-down would involve postponements of published programmes, at a time when in my judgment we should do more rather than less in education, I could not accept it. It may be useful if the main arguments are drawn together in this paper. Arguments of Political Principle 2. The grant of the vote to men and women at the age.of 21 started a race between an egalitarian and an opportunity State. Stripped of inessentials the choice before the new electors was between a controlled economy in which wealth was much more equally distributed irrespective of merit and an open society in which opportunities for all would be enlarged to a degree that would produce " o n e n a t i o n " with far less class-consciousness. [ .. -. The standards of public education were bound to become all-important in this race. Unfortunately the Tory horse had to carry a heavy handicap. U p to the war British education was in no condition to provide fair and,.wide opportunities for all children. In relation to the introduction of universal suffrage the 1944 Education Act was 25 years too late; worse still only in 1956 did we begin -to build a system of technical education remotely adequate for a leading industrial nation; Nevertheless the Education Act was a Conservative measure, and, provided we carry it out with unremitting vigour, it will prove an invaluable and permanent asset to our party. Tory Governments since 1951 have therefore been under exceptional pressure so to improve the public system of education that we all become middle-class, speak the same language and can comprehend the responsibilities of living in a free and fully-employed society. This is happening. But the open question is whether the pace is adequate to the political necessity. We can take comfort from the fact that the maintained schools are achieving a fair mix-up within the range of families who send their children to them. The 11-plus exam picks out the clever children and puts them on the ladder to higher education. But it is common knowledge that secondary and further education for the average child are still far from satisfactory. 3. A social division arises between children who go to maintained schools arid children who go to fee-paying schools, which are expected to give a privileged start in life. This division is a gift to the Socialists. Our political interest is to see that the gap between the two systems is narrowed. To that end I have said that: 60206
(a) We must improve the maintained schools so that the overlap in educational standards will grow at a rate fast enough to take the sting out of the controversy. (b) Parents should choose to send their children to primary schools wherever the education offered is satisfactory. . ,,One effect therefore of a slow-down in the expected rate of improvement (see the Appendix to my Paper C. (61) 212 which shows how big is the task before us to eliminate oversize classes in primary and secondary schools) in.the maintained schools would be to cast doubt on our determination to narrow the gap between the two systems. Such action would bring general protests from the Trade Union Congress and the Labour Party; and from the local authorities responsible for education who are now all converted to expansion in the service. Indeed a new feature in the last few years has been that Tory-controlled councils are now, if anything, the most enthusiastic. Opposition would also come from the Public Schools and the Universities. Their leaders are nervous that the Labour Party will destroy the independent schools, and they fully realise the importance of swift improvement in the maintained system for the reasons given above. It is hard to point to any important body of opinion in the country, or any single newspaper, which would not oppose a slow-down in the rate of educational advance. The political results of doing so would be serious and. the contradiction with a policy of opportunity and growth obvious. Economic Arguments 4. Since the war the nature of public education as an element in national policy has undergone a radical re-assessment. Education for the masses used to be bracketed with other articles of consumption, like better housing, food and clothing, and higher Old Age P e n s i o n s - a l l benefits to be progressively increased as a country became richer. But recently the pace of change has been so quickened" by science and technology that education is more often thought of as an article of production rather than as an article-of consumption. Economists are now studying, the relation between the expenditure on education and the rate of economic growth, with conclusions pointing to education as a form of public investment which gives a very high return. The British employer is becoming converted to this view. His demands, grow every year for better educated entrants to all occupations. H e is. discovering, that industry needs more than a few top-level experts; these men require t o be supported by technicians and sub-professional grades in far greater numbers, than we have to-day. As the President of the Board of Trade will confirm, the prospect of entry into the Common Market has much accelerated the demand for. better education at the technical level, which is itself dependent on better education i n the schools. If then we slow down the rate of educational advance, we shallbe going counter to one of the clearest and loudest demands of British industry. Income-Policy Arguments. 5. Figures given by the Treasury show- that increases in incomes in excess of what we have earned have been the major cause of the stop and go in the economy since the war. The two sides of industry and the country in general are now being asked to accept a. reduction in the annual increase in incomes to about half what they have become accustomed to expect. In this policy compulsion is ruled out. We are bound therefore carefully t o consider whether what we do in other directions will help or hinder consent to income restraint. I believe the majority of the electors would accept cuts provided: (a) They were fairly distributed between one income: group and another. (b) They were seen to be part of a design to release greater resources for production either in the public sector or in the private-sector. Electoral Considerations 6. We have had in the last ten years two domestic priorities of which the country was proud and from which the party.derived much benefit: 300,000 houses and the civil use of nuclear energy. To-day we have no obvious priority. The CONFIDENTIAL
;
message is restraint all round. It may be said that the balance of payments has to be our priority, but this has little appeal for the working man and his family. Growth would be a sound and attractive priority. But growth is one of those omnibus words like duty, which does not mean much unless a man knows where and how it is to be achieved. If growth were to catch on it would have to be illustrated by manifest choices in policy—in the cuts and increases in public expenditure, in taxation and investment and so on. We know from experience that in campaigns to arouse public support for a new line of action it is necessary: (a) To be consistent. (b) To plug a very short list of outstanding examples to create the desired image. I fear that some of the measures now proposed are inconsistent with a growth cum-incomes policy, but be that as it may, I submit that public education is the most telling priority we have, the best banner for a growth policy, to collect the support of the largest number (all the mothers) to take less to-day in order to enjoy more tomorrow. There is a further argument for such a choice. People are disturbed about standards of behaviour and are looking round for ways to reverse what appears to be a progressive decline. The home and the schools interact in the formation of character. When one is weak the other has a greater responsibility. To-day it is widely held that parental discipline is slack and that everything possible should be done to help the schools to take the strain. 7. In my view the political, social and economic arguments all point to the wisdom of doing more rather than less to improve the system of public education. D. Ministry
of Education,
3rd January,
1962.
W. 1,
E.
1 DOCUMENT IS T H E P R O P E R T Y O F H E R B R I T A N N I C M A J E S T Y ' S G O V E R N M E N T )
C.(6
:CPY
NO. i
4 t h J a n u a r y , 1962
CABINET
RAILWAY WAGES
N o t e by t h e S e c r e t a r y of t h e C a b i n e t
T h e M i n i s t e r of T r a n s p o r t h a s a s k e d m e to c i r c u l a t e , a s a b a s i s for t h e C a b i n e t ' s n e x t d i s c u s s i o n on r a i l w a y w a g e s , t h e a t t a c h e d note by officials d e s c r i b i n g the b a c k g r o u n d to the p r e s e n t situation a n d a n a l y s i n g p o s s i b l e c o u r s e s of a c t i o n .
(Signed) N O R M A N B R O O K
C a b i n e t Office, S . W . 1 .
4 t h J a . n u a r y , 1962
RAILWAY WAGES Note b y Officials I.
BACKGROUND
The present pattern of railway wages was fixed in the light of the Guillebaud Report.
In June I 9 6 0 ,
a settlement was made
(effective from hth January, i 9 6 0 ) which gave an 8% increase to the conciliation grades and a 1C% increase to salaried staff.
In
April 1 9 6 1 a reduction of hours (without loss of pay) was agreed which is broadly equivalent to a 5% increase in the "basic wage. This concession is effective from the 1 s t
January, 1 9 6 2 .
The
unions are now claiming an increase of 1 0 to M% as representing the extent to which they have fallen "behind the comparisons recommended in the Guillebaud Report.
The Ministry of Transport
regard some of the unions' arguments and comparisons as fallacious and regard
as "being a fair measure of the extent to which the
railways have lagged "behind on the Guillebaud basis.
If reference
is made not to a league table of thirteen particular industries which formed the basis of the Guillebaud recommendations but to the wider picture of the movement of wages over the past two years, taking into account the hours reduction mentioned above, an increase of 6 to 7% could be regarded as sufficient to justify a claim that the broad basis of comparability was being maintained. 2.
,;
As has just been said, the railways have falien behind" other
forms of employment
and this is affecting their ability to recruit
labour, especially in certain grades and in certain areas like the Midlands where competition with other employment is particularly acute.
On the other hand, in general the railways' need for
manpower is gradually declining, so that it can scarcely
he said
that over the country as a whole the staffing situation is in any way desperate.
Prima facie this would point to a concentration
of any wage increases on certain grades and certain areas rather than any overall advance.
But any such settlement would run
counter to what has become well-established practice on the rail ways - namely that there should be national wage settlements - and would be bitterly opposed by the unions. 3*
There is basically a clash of principle implicit in the present
situation - namely whether (as the unions explicitly claim) railway wages are to be settled on the Guillebaud basis of comparability or whether some other basis should be applied more nearly aligned to the general rate of increase which the economy as a whole will be able safely to afford in 1 9 6 2 / 6 3 .
In short, should the
Government attempt to make a clean break with Gtiilleb&ud at this juncture or not? 1
k.
The p o s i t i o n
who c l e a r l y
attitude
d o e s n o t w a n t t o b e s e e n "by t h e
breaking with for
i s c o m p l i c a t e d by t h e
the Guillebaud b a s i s ,
a settlement
be prepared
of,
say,
6%o
to put forward
It
on h i s
t h a n 5% ( a s a n o p e n i n g b i d f o r
of D r .
Beeching,
railway , unions
t h o u g h he i s p r e p a r e d is
doubtful
a settlement
any o f f e r
at
6%),
that
either
w o r k e r s may n o t
strike until
to
go t o a r b i t r a t i o n
the negotiating
includes arbitration,
has been f u l l y
is nothing to provide
that
in practice
the
British
arbitration
Transport
implemented them i n t h e
past.
the Transport
if
there
is
would depend Commission would n o t
If
it
argued
their
factor
much l e s s
the
himself,
Transport
the current
a vis
fall
increase pro tanto Commission,
f inane i a 1 year
and t o i n c r e a s e
by h i g h e r
would be u n r e a l i s t i c
to
Transport
Beeching
attitude
would
let
directly
consideration
well
their
be
the
deficit
of
the
t o b e £ 1 3 5 m.
t o £ 1 5 0 m.. i n increase
1962/63 o f 6%
making good
charges and economies,
that
in
- w o u l d c o s t £ 2 0 m.
that
in the
would be o b t a i n e d
go t o r e d u c e t h e
on
some s c o p e f o r
expect
year anything substantial
to meet t h e
a r b i t r a t i o n would
(An o v e r a l l
t h e r e would be
of a w a g e i n c r e a s e
to
deal
and he m i g h t
the present
Theoretically
ought i n p r i n c i p l e
w o u l d b e d a m a g e d ,)
which i s expected
any wage i n c r e a s e .
from t h e
mind
a great
(Dr.
general
in
a year).
quite apart
in practice
gamble" of
t o 1 0 s . on t h e b a s i c w e e k l y r a t e
financial
always
outcome
Commission v i r t u a l l y
equivalent
it
procedure
the possible
the unions
of
practice
arbitration
correct
see p a r a g r a p h h above -
regardless
some p a r t
the
his
any wage i n c r e a s e w i l l
Exchequer and w i l l
but
must be b o r n e
the Tribunal. but
"calculated
attractive.
In effect
British
would be
other hand the Transport
c a s e go b y d e f a u l t
6.
this
case before -
there
has
and c o n v i c t i o n w i t h which t h e
his position vis
on t h e
it
must b e r e m e m b e r e d t h a t
h a v e t o do t h i s
that
solutions
In considering
on t h e f o r c e
b e an i m p o r t a n t feel
indeed
disagreement.
of a r b i t r a t i o n ,
Formally (B.T.C.)
the
which
Commission c o u l d always be t a k e n t o
by the u n i o n s and t h a t
provides
awards are binding,
Commission
Thus i n c o n s i d e r i n g p o s s i b l e that
less
and t h a t
machinery,
utilized.
argue
The a g r e e m e n t w h i c h c o v e r s r a i l w a y w a g e n e g o t i a t i o n s has the r i g h t
would
of
5.
side
to
w h e t h e r he
own a c c o u n t
as
any
in
coming i n t h i s way
such a d d i t i o n a l
heavy c a l l
but
on t h e
income
Exchequer
deficit.
7.
Given
(i)
fall
directly
the fact on t h e
that
the cost
Exchequer
(ii)
o f a n y wage i n c r e a s e
the p o l i t i c a l
i n t h e r a i l w a y wage i s s u e
as a " t e s t
be u n a b l e t o d i s c l a i m
responsibility
all
2
case", for
will
and p u b l i c
t h e Government the ultimate
interest
will settlement.
But it would be undesirable to have a situation in which the
Government were brought too directly into detailed negotiation of
a settlement
(especially as this might become a precedent for
other nationalized industries - e.g. the coal mines).
It follows from what has Just been said that, where in the
following section of this memorandum reference is made to Government
intervention or non-intervention, this would be likely to be a
matter of degree rather than of an absolute distinction.
II. POSSIBLE 8.
COURSES , OF
ACTION
In the following paragraphs we analyze various ways of
handling the railway wage claim under two main heads according as to whether the Government does or does not openly intervene in the matter. 9.
On the basis that the Government does not openly intervene,
the possibilities would be: (a)
Settlement by negotiation m
To authorise the B . T o C .
to reach the best settlement they can,
which is likely to mean an increase of 6% (or possibly 7%) from 1 s t April, 1 9 6 2 . The adjjjitages^ of this would be: (i) (ii)
It is what Dr. Beeching himself advocates,
It would retain the goodwill of the railwaymen and thus
facilitate the reorganisation of the railways,
(iii)
It Y/ould avoid the economic loss which a strike would
cause.
The disadvantages are: ( 1 )
Although an increase from 1 s t April, 1 9 6 2 , might not technically break the pay pause, an increase of as much as 6%,
however carefully it were presented, would
gravely jeopardise the possibility of getting something like 2^-3% ( 2 )
accepted as a "norm" for the 1 9 6 2 wage round.
A settlement at this level might mean in effect that we should be saddled perhaps indefinitely with the continuance of the Guillebaud "comparability" basis for the railways.
( 3 )
An increase of 6% would add £ 2 0 m. a year to the deficit of the B . T 0 C 0 falling directly on the Exchequer.
(h)
There would be a widespread feeling that if the Govern ment cannot keep wage increases to a reasonable level in a field where it provides the money, talk of a wages policy must be meaningless. 3
SECRET
30
A ,",split offer"
M
To authorise the B.T.C. to offer, say, 3% from the 1 s t April next with a firm offer of a further -similar increase from April 1 9 6 3 .
Such an offer, if it were
negotiable, would do less damage to the Government's wages policy than a settlement at 6% and would probably seem reasonable to the public.
On the other hand, if
a settlement could only be reached on a "split offer' at a higher figure (say, two instalments of k% each), it seems doubtful whether this could be regarded as 1
consistent with the Government s wages policy in the short - or longer- term;
and, by giving the impression
that a k% increase was an acceptable annual "norm", might even do more harm than, say, a 6 - 1% settlement.
It
is not known whether Dr. Beeching would be prepared to make an offer of 3% plus 3% on his own authority.
Even
if he were it seems doubtful whether the Unions would accept it.
It would be a complete departure from the
Guillebaud basis and would probably be denounced by the Unions as such.
Normal^ arbitration
To insist on the dispute going to arbitration, preferably on the basis of a modest but not wholly unreasonable offer by the B.T.C. of, say, 2-3%.
But
if the B.T.C. were unwilling to make such an offer they might nevertheless say that the differences between the parties were so great that it was felt that no offer could be made and that the Arbitration Tribu nal must decide.
The B.T.C. would presumably be asked and the
Government would have to state in advance whether the award would be honoured.
The Government would'",
presumably say that it would honour the award, except in so far as it was given from a date earlier than
1st
April, 1 9 6 2 . This course would have the advantages that: (i)
There would be no departure from the
existing machinery,
(ii)
Neither the Government nor the B.T.C. would
be directly responsible for the figure
and date chosen.
4
The disadvantages would he that: (1)
If the unions' case were vigorously contested "by the B o T o C .
a moderate and satisfactory award might
be given;
but there would be a real risk that the
award might be substantially more than ( 2 )
6%.
The Arbitration Tribunal might give an award from, say, the 1 s t
January,
1962.
If the Government wished
to avoid the risk of this, it would have to ensure that an advance warning was given that no award would take effect before, say, the 1 s t April next.
That
in itself would be strongly criticized by the unions . ( 3 )
The railwaymen, who are getting impatient, would dislike being forced to arbitration, which takes time, especially if this were on the basis of'ho award before the 1 s t April, 1 9 6 2 " .
It might not
succeed in preventing local strikes and "go-slows". (k)
A generous arbitration award would be much less effective, from the B o T . C o ' s point of v i e w ,
than
a generous agreed settlement, in retaining the goodwill of the men and the unions. ( 5 )
The Government might be criticised for allowing so important an issue, involving so heavy a potential burden on the Exchequer to be settled by arbitration.
But any such allegation that the
Government was abdicating responsibility could be countered by a reminder that the principle of arbitration has for long been accepted by Governments of all parties and that a large proportion of wa^e and salary i n c r e a s e s i n the public service (the cost of which falls cfirectly on the Exchequer) are in fact settled in this way. 10.
Since the large railway deficit has to be met by Exchequer
grant, the Government could reasonably claim the right to intervene
in the present wage claim in a way which would be inappropriate in
the case of the other nationalised industries.
The issue would
then become openly one between the unions and the Government. As
things stand, Dr. Beeching is prepared to negotiate on his own
responsibility and to get the best settlement he can;
alterna
tively, he would want to receive an order from the Minister as
to the line which he is to pursue and he would not conceal fact that he was acting on instructions. 5
On this basis
the
the possibilities might be: (d)
No.funds
*
To announce that no additional money will be provided to
meet a wage increase until further notice.
T 1 : i e
adv ant agree
(i) (ii) (iii)
of this would be that:
It would preserve the full rigour of the pay pause,
It would have a salutary effect in other industries,
It would avoid increasing the cost of the railways
to the Exchequer.
The dissudy ant ages would be that: (1 )
It would be unacceptable to the unions and would
undoubtedly cause a strike.
( 2 )
It would appear unreasonable to the general public, who are aware that on merits the railwaymen have a fair case for some increase.
( 3 )
It would be unacceptable to Dr. Beeching, who might well say that he could not usefully continue in office.
(e)
Mjy ted. f undj3
The Government could say that it was prepared to make funds available for a wage increase but on only a limited scale.
This might be presented as a total sum of say,
£ 1 0 m. (equivalent to about a 3% wage increase), to be made available in 1 9 6 2 ,
on the basis that the Government
would
leave it to the B.T.C. and the unions to settle the detailed allocation of the total amount either in the form of a general increase or in the form perhaps of special increases for different grades, localities, etc.
On the other hand,
it might be taken as an overt wage subsidy and might discourage the B.T.C.'s own efforts to achieve viability. An alternative method of presentation would be for the Government to undertake to provide the B.T.C. with such funds as might be needed to honour an increase of x.% (or to honour a 'split offer' Qf 3% plus 3% on the lines of paragraph 9 ( b ) above.)
This formula would leave room for pressing the
B.T.C. to meet at least a part of the increased wages by
increased charges and additional economies.
A firm statement by the Government on the above lines would have the advantage of appearing reasonable and of according with the Chancellor's policy of looking for general wage restraint in 1 9 6 2 ;
but recognising the need for
increases in certain special cases (of which the railways could reasonably claim to be o n e ) .
SE
V Y
S 1c d*ff^6£Y
33
The question is, however, whether an attempt to impose
a settlement on these lines would: (i)
'
avoid a strike, and
avoid the loss of Dr. Beeching.
(ii)
A strike, though damaging to the long-term prospects of
the railways and to the economy, might not be an
unmitigated disaster, provided that it could be successfully
resisted with the general support of the community and that
it helped to damp the general pressure for higher wages.
It would of course be disastrous if the Government were
obliged to end the strike by an over-generous settlement.
The loss of Dr. Beeching would be a serious setback to the
hopes of getting the railways on to a sound footing, since
it is unlikely that anyone of equal calibre would be willing
to step into his shoes.
A decade of railways administration
under indifferent leadership rffould cost the Exchequer and the
community hundreds of millions of pounds. not be confined to Dr. Beeching alone:
(The loss might
some of his close
associates might resign with him.)
f
()
"Arbitration" with special terms of reference
The Government might propose that instead of going to
ordinary arbitration there should be a special tribunal
which would be specifically asked to make a judgment on
which rate of increase would be appropriate taking all
circumstances into account - e.g. the Guillebaud background,
the general state of the economy, the railway deficit and
so on.
The advantage of this course might be that, if the tribunal acted sensibly, a modest award (of,, say,
k-5%)
would be given, a lasting break would have been achieved from the Buillebaud concept, and that in any event the Government would not be held responsible for the settlement. ^ (1)
e
disadvantapes of such a course would be that:
It would be a depaeture from the normal machinery of negotiation and arbitration.
(2)
If the tribunal were specifically asked to make an award on a Guillebaud basis or gave undue emphasis to this the result might well be a disastrous figure of 1 0 or ^^%.
( 3 )
Hov/ever the terms of reference were drawn, experience suggests that the findings of ad hoc tribunals of this type are unpredictable and often highly
(Ij)
embarrassing.
Even a favourable settlement achieved in this way would earn little good will from the men and the facade of obtaining an independent judgment without submission
to normal arbitration would be of relatively little value
to the Government.
( 5 )
It seems improbable in any case that the unions, who are entitled to seek arbitration from the standing tribunal, would be willing to let the matter be referred to an ad hoc body whose terms of reference, if they were acceptable to the Government, would appear to be against thenu
2 n d Januarv
i?-n
1962
'rigged'
HIS D O C U M E N T IS T H E F R O F S R T Y O F H E R E R I T A N N I C M A J E S T Y ' S
GOVERNMENT)
COPY NO.
CJ62JL7
10th J a n u a r y , 1962
CABINET
INCOMES F O L I C Y Note b y t h e C h a n c e l l o r of t h e E x c h e q u e r I c i r c u l a t e for t h e i n f o r m a t i o n of m y c o l l e a g u e s a copy of t h e l e t t e r w h i c h I h a v e s e n t t o d a y t o t h e C h a i r m a n of t h e E c o n o m i c C o m m i t t e e of t h e T r a d e s Union C o n g r e s s -
Treas ury Chambers,
S.W.I.
10th J a n u a r y , 1962
CONFIDENTIAL
INCOMES
' '
POLICY
Letter from the Chancellor uf the. Exchequer
to the Chairman of the Economic Committee of the T.U.C.
1.
I promised that I would send to you as quickly as I
could a paper which might, form a basis for continuing our
discussion of last Friday, 5th January.
The Objectives
2.
My purpose as Chancellor Is to promote economic
vitality and strength in this country sufficient to enable
us to carry out our international responsibilities for
defence and aid to less developed countries, but als-s
sufficient to provide a continuing, broadly spread,
improvement in the standard of living of all.sections of
the community. .
3.
To achieve that result, certain tilings are necessary.
Our export trade depends upon our goods being competitive,
in other words upon our costs being such that our prices
are attractive to overseas purchasers.
Upon our ability
to export depends in turn the balance of paynents.
Unless
that is satisfactory we cannot have the soundly based
growth in cur economy which is essential.
1.
CONFIDENTIAL
Personal Incomes
4.
The largest single factor in all this is the rate
of increase in personal incomes.
Since the War there
has been a persistent tendency for money incomes to
grow faster than the volume of national production.
For example, "between 1953 and 1960 incomes from
employment and from profits both rose more than twice
as fast as production.
I start therefore with what
I regard as the basic proposition.
Unless increases
in personal incomes of all kinds are kept broadly in
line with increases in production, our objectives of
sustained growth and higher standards cannot be
attained,
July Measures
5.
The unsatisfactory prospects for our balance of
payments caused a major loss of confidence in sterling
in the summer.
The measures which I introduced on
25th July were partly short term and partly long term.
They did not single out any particular section of the
" \
community.
2.
COMFSDEMTIAL
Although public attention has been centred on the-pay
pause, it was only one element in a comprehensive
To relieve the strain on the balance
national approach.
of payments the following measures were taken which
affected a wide range of people in all walks of life:
(1) Overseas
Curtailment of Government
diplomatic and
military expenditure.
Tightening up of exchange control over
private investment of capital in non-sterling
countries.
A request that a greater proportion of
^companies' overseas earnings should be
repatriated.
(2) At Home
Restrictions, on public expenditure.
Increased taxes on consumption through
the use of the Customs and Excise surcharge.
Tightening of credit by a 2 per cent,
increase in Bank Rate, a call for Special'"'.
Deposits, a request to the banks and the
insurance companies to be severe in dealing
with applications for loans to finance
personal consumption and speculation.
(3) Diyid^ends,.,.and,. Prof;its.
A request for dividend restraint.
A commitment to tax certain short-term gains,
now trgatod as capital and therefore -outside the
tax net.
3.
CONFIDENTIAL
NATIONAL ECONOMIC DEVELOPMENT COUNCIL
6.
In addition I pointed the way to means of tackling
the long term problems.
I referred to the steps which
the Government had already taken to improve the coordination
of long term programmes in the public sector, and I
suggested that the time had come for closer consultation
between the Government and both sides of industry about
national economic development.
This led to the proposal
for a National Economic Development Council which we have
discussed together on several occasions, and about T.U.C.
participation in which I still av/ait your reply.
Meanwhile
I have appointed Sir Robert Shone to be Director General
of the staff of the Council.'
7.
This paper is primarily concerned with incomes.
That problem is immediate and must be tackled now.
But
I cannot let pass the opportunity of emphasising to you
once again my belief in the importance of the work of this
N.E.D. Council and the great opportunity which it. provides
for the two sides of industry to influence policy, bo tackle
in cooperation with the Government the obstacles to sound
growth, and to consider with us the availability and use
or misuse of resources.
I ask you once again, as a body
which has consistently urged upon me the advantages of such
coordination of economic effort, to join in this work.
When the Council is established I. will place before
it papers on the prospects of the United Kingdom economy
for the next five years, and on the problems of economic
-growth and national efficiency, and will suggest that as
lone of its early actions the Council should instruct its ,
I
4. CONFIDENTIAL
staff, in collaboration with the main industries, to examine the long-term prospects of these industries, their requirementpfor investment and skilled, manpower and their expectations m to production and exports. The, resultsvwould then be correlated with each other and with- the Government's plans for the public sector, to provide a basis for future action. National Incomes Policy I have also stated for example in the House of Commons
8.
on 18th December, that I am convinced of the need for the
Government to try to work out with both sides of industry
a long term policy to keep increases in money incomes in
line with the increase in national production.
9.
A necessary part of any such policy will be the
Government's responsibility, by use of fiscal and monetary
measures, to ensure that excessive demand in the home market
does not drive up prices, prevent the growth of exports and
attract a greater quantity of imports than we can afford.
If arrangements cannot be made for keeping the. total growth
of incomes in a proper relationship to the total growth of
production, the Government will be forced to act in other
ways.
The stark truth is that the alternative to an incomes
policy is further restriction of demand with loss of economic growth and with higher levels of unemployment than would
otherwise be the case.
But I should much prefer to be
thinking in terms of the sound growth which would ease the
solution of so many of our problems.
10.
I would like to set out again in this paper what seem
to me to be necessary elements in any long term incomes
policy.
The Elements of a Long-Term Policy
II.
First of all there must be a common understanding'of
our economic problems and prospects. N.E.D.C.
12.
Here the
could prove of the greatest value.
Secondly, we must improve public understanding
of the fact that increases in the total of money wages and salaries above a certain point are self-defeating because they put up prices.
It is often thought that
increases in wages and salaries do not matter because they are offset by reductions in profits. no evidence to show t h a t in a
community
There is
enjoying high
levels of employment, wage increases come out of the profits;
indeed since the war, wage-costs and profits
hive gone up broadly in lino. 13.
Thirdly, all those who influence or decide the
course of wages and salaries, whether by negotiation,
arbitration or in other ways, or who determine profit
margins, dividends and prices have a special
responsibility.
They must recognise that in the long
run all will suffer if sectional interests are allowed to .
prevail over the interests of the community as a whole.
Just as important, they and the general public must be
Jkept informed about the country's economic circumstances land prospects in such a way that not only those or decision [Immediately concerned with a particular negotiation^ but khe community as a whole are able to judge what effect or decision m particular settlement/will have on the national economy, fee
impact of such information would be increased if it
Ifanie from a body such as the National Economic 6.
CONFSDEMTIAL
Development Council enjoying the support of both sides
of industry and the Government.
14.
Finally, I recognise that wage and salary earners
cannot be expected to accept the restraint in v/age and
salary increases needed to keep rises in incomes within
reasonable limits, if those who benefit from profits
are,subject to no such restraint.
If, therefore, it was
established that aggregate profits were increasing
disproportionately as compared with wages and salaries,
the Government would not hesitate to take corrective
action in the fiscal or other fields.
I should, however,
make it clear that no Government which seeks to
increase productivity and growth can contemplate
the
imposing a uniform limit on/profits or dividends of
Such a limit would penalise
individual concerns.
growing and enterprising concerns and industries and
impair their ability to get the capital they need for
expansion, while it would leave inefficient and
stagnating concerns unaffected.
The present situation
15.
The "pause"' has achieved a considerable' effect in
restraining costs at a time when it was particularly important they should be restrained.,
The full effect
of this restraint on our international competitive positier
has yet to be seen.
But what has been gained 1
could easily be thrown away if the "pause' were followed by a phase of large and widespread increases in incomes. But, if this does not happen, we have now an excellent prospect for a movement in comparative cost levels of a kind favourable tovthis country.' 7.
CONFSD NTIAL
It must
be remembered that when a country needs to increase its exports sharply, it is likely to have to accept less . favourable prices than if it merely wishes ta keep pace with other countries.
Largely because of the loss of
income from invisibles and an increasing contribution to the development of other countries, we have a large adverse balance to wipe out and we are not likely to do this without a further substantial increase in our visible exports. 16.
A national incomes policy must take a considerable
time to work out.
Meanwhile the Government hope that
it will be possible to gain the support of both sides of Industry for intermediate arrangements to replace the "pause" in its present form by the end of this financial year.
This would make It possible to give effect to the
increases granted since July 1961, for Implementation from a date tc be decided by the Government; to put the M-rate review into effect;
and to grant those -parts of
arbitration awards that had been held in suspense. Intermediate arrangements :
17.
In existing circumstances large sums will not be"'
available for increases in personal incomes during 1962.
Until we can tackle together the obstacles to sound economic
growth, and produce results, large increases in wages and
salaries are bound to result in inflation. In other words,
the increases will not be real in terms of purchasing power.
Therefore the Government must give guidance to
those responsible;
they intend to do so after consultations
with both sides of industry and bearing in mind any
advice received.
They would, of course, prefer to give
guidance which has the general support of both sides of
industry.
18.
Against the background of the estimate,which my
advisers have given me of an increase in' production during 1962 of about 2i per cent, various possibilities have
been suggested: (a) The Government and both sides of industry
should accept an understanding that the
overall rate of increase in wages and .
salaries in 1962 should be kept within a
stated figure.
This must also provide for
the exceptional cases where there are
sustainable claims for special treatment..
It must also be realised that some
industries cannot afford any increases at
a.11, if they are to remain competitive.
(b) The. Government and b vth sides of industry
should accept the fact that only a
limited sum can without Inflationary
effects be distributed by way of wages
and salaries during 1962.
Out of that
sum must come the increases for 1962
already agreed, and any exceptional
settlements.
(c) The Government and both sides of industry
should examine the feasibility of devising
a formula which would do justice to those
in employments where productivity cannot
be measured, while taking some account of
actual increases in productivity where they
can be ascertained.
19.
Each of these courses has certain disadvantages.
Under course (a), the percentage stated migftt he
regarded as the minimum in each case and not an
overall maximum.
Under course (b), there might be the
feeling of "first come first served", and an
acceleration of claims.
Under course (c), there
might be difficulty and protracted argument about the'
formula.
I should like your views where the balance
of advantage lies.
20.
I certainly do not intend that restraint in 1962
should be limited to wages and salaries.
But gross
company profits before taxation amounted to £1,679 million
in the second and third quarters of 1961, that is,
slightly less than in the corresponding period of
1959 and II per cent, less than in the first half of
-
1960.
It should be remembered that company profits now
bear a rate of taxation of 53-1 per cent, as a result of
increases in profits tax in two successive Budgets.
Ordinary dividends, before taxation, represent
only 7 per cent, of wages and salaries -and, because
investment incomes are more heavily taxed than earned
incomes, dividends after taxation represent an even
smaller proportion of net wages and salaries.
Furthermore
the rate of increase of dividends has recently fallen
sharply.
Nevertheless the position as to profits and
dividends must be carefully watched to see that
because of wage restraint they do not improve their
relative' position.
Lastly, in this context, it should
be remembered that I have taken the exceptional step of
committing myself in advance to the introduction of a
tax on short-term gains not now subject to tax,
10.
CONFIDENTIAL
I have been dealing v/ith the intermediate phase.
21.
For the long term the real answer is to get a rate of sound
growth which can carry reasonable increases.
By sound
growth, I mean growth which is not based.on inflation.
As I have stated, I believe this to be possible with- co operation, but if we are not to ruin our chances of
obtaining that sound growth, increases in 1962 in personal
incomes must be kept within the increases in national
production.
If that is not done, there will be inflation
and I shall be driven to further restrictive measures.
We must also face the fact that if the pause is ended and
we revert to pre-pause practice, the increases m
incomes
in 1962 will not be kept within the increase in national
production.
22.
To sum up I wish, with the help of both sides of
industry, to replace the pay pause in its present form
with suitable intermediate arrangements.
But I am equally-,
anxious to proceed as rapidly as possible with a combined
effort to increase the real wealth of the country.
I
therefore consider it highly important to make"early
progress with the setting up of an effective National
Economic Development Council,
I would be grateful for your views on the suggestions
set out above and for any other advice which you have to
give to me, as soon as convenient to you,
10,1.1962
T,16-62 CONFIDENTIAL
THIS DOCUMENT IS T H E P R O P E R T Y O F H E R B R I T A N N I C M A J E S T V S
Printed for the Cabinet.
January
GOVERNMENT
1962
Copy No.
C. (62) 8 12th January, 1962
55
CABINET
UNIVERSITY
SALARIES
MEMORANDUM BY THE CHANCELLOR OF THE EXCHEQUER
The Economic Policy Committee at their meeting on 10th January were unable to reach agreement on this matter and decided that it should be referred to the Cabinet. 2. The existing University salary scales have been effective from 1st January, 1960. The University Grants Committee, who are the Governmenfs official advisers in this field, had it under consideration to put in fresh recommendations to us a year ago, but with my approval it was suggested to their Chairman, Sir Keith Murray, that they should postpone doing so until it had become clearer what sort of increases were likely to be made in teachers' salaries as a result of Burnham negotiations. The Chairman persuaded his Committee accordingly, and I feel a certain responsibility for the fact that the University Grants Committee's eventual recommendations did not reach me until July 1961, a few days before the beginning of the pay pause. 3. The recommendations of the University Grants Committee, when they arrived, were for increases that would cost an additional £5-05 million in a full year, i.e., a 17 per cent, increase on the current salary bill. All University grades (except Clinical Professors) would receive increases, the number involved being about 12,000. The recommendation was that increases should take effect from 1st August, 1961. 4. Recommendations for still larger increases had been made, to the University Grants Committee by the Committee of Vice Chancellors and by the Association of University Teachers. All three bodies were informed t h a t - t h e pay pause precluded any increase at the present time, but that meanwhile the claim would be examined on its merits. 5. In October 1961 the Chief Secretary, Treasury, took over the examination of the University Grants Committee's recommendations, which were based on two main grounds: (i) Deterioration of relativities between University staff, on the one hand, and Civil Service Administrative and Scientific grades and the teaching staff in the Colleges of Advanced Technology on the other hand. (ii) The need to attract (and retain) good Honours Graduates in order to implement the Governmenfs policy of rapid University expansion. 6. It is not accepted by the Treasury that there is any comparability between the work of Administrative Civil Servants and that of University staffs, or any ground for particular pay relationship between them. As to the Colleges of Advanced Technology they have a quite different pay history and a different pay structure, with more money in the lower grades and less at the t o p ; they have hitherto come under the Burnham procedure, which has just given them a 174- per cent, increase effective from 1st January, 1962. 60264
7. The Chief Secretary, Treasury, did not consider that the University Grants Committee proposal of a 17 per cent, increase for University staff was justified, but came to the conclusion that an increase of some 8 per cent, (costing £2-4 million) was justifiable having regard to the proposals for University expansion (a 30 per cent, increase in students over the next five years) and to the salary rises which have taken place from 1st January through the rest of the teaching profession. He recommended that, as the rise was primarily for recruitment ^-purposes, it need not start from a date earlier than the beginning of the next academic year (1st August, 1962). Whatever was proposed would, however, have need to be announced in January or February, 1962, as that was the period of year when recruitment for the next academic year started. 8. He had meanwhile informally sounded the Chairman of the University Grants Committee who said that, if the Government ruled that no more than a certain amount of money was available this year, the University Grants Committee would have to accept that; but that they must make clear that in their considered opinion anything falling substantially short of their recommendation would fail to meet the need to attract and retain staff of sufficient quality and quantity, and that it would have to be publicly announced that the Governments decision was not in accord with the Committee's advice. The least that would suffice in the Committee's view, and that only as an interim expedient, would be a sum of £2f-£3 million, i.e., a 91 per cent, to 10 per cent, increase, concentrated entirely on improving the scales of the recruitment grades (Assistant Lecturer and Lecturer) and giving the higher grades nothing for the moment. 9. The Chief Secretary told the Chairman that he did not think that such an arrangement, concentrating the whole available increase on the two lowest grades, would have any durability. The most that seemed to him reasonable would be, if 9 per cent. (£2 - 68 million) were available, to concentrate the whole of the extra 1 per cent, on the recruitment grades. 1.0. The Economic Policy Committee considered the issues. The majority took the view that the Chief Secretary's proposal of an increase amounting to 8 per cent, or 9 per cent, on the current salary bill, distributed so as to benefit to some extent all the main grades, but with proportionately larger increases for Assistant Lecturers and Lecturers, would imperil the Governments endeavour to secure restraint, in the intermediate stage after the pay pause. If the Government, in the case of the Universities where the matter was entirely under the Governments own control, announced an 8 per cent, increase, that would wreck any chance of securing a settlement for the railwaymen or the miners or other classes of industrial workers with substantial claims, at anything like a figure of 2\ per cent. The Government would seem to be refusing to take the medicine which they prescribed for others. The Minister of Health, in particular, felt that a settlement for the Universities at 8 per cent, would leave him with no chance of securing a settlement at around 3 per cent., of a very large claim that had come in from nurses under the National Heath Service. The majority of the Committee considered that 3 per cent, for the University staffs from 1st August, 1962, was the most that the Government could give, with or without an indication that a further 3 per cent, might be granted in 1963 and another 3 per cent, in 1964, making 9 per cent, in all over three years. 11. A minority of the Committee took the view that public opinion would recognise an obvious distinction between the problem of University staffs and the problem of railwaymen, miners and others. By August 1962 the University staffs would have received no increase for more than 2\ years, whereas all the rest of the teaching profession (including the Colleges of Advanced Technology which recruit from just the same field as the Universities) have had large increases as from 1st January; the teachers and the staffs of the Colleges of Advanced Technology, who had been on their previous scales for 2\ years, have received 14 per cent, and \1\ per cent, respectively. It did not seem possible to present an increase of only 3 per cent, for the remainder of the teaching profession—the University staffs-as a policy that made any sense at all; and a Government decision of that character seemed likely to cut right across the Governments previous policy of rapid University expansion. 12. The Economic Policy Committee invited the Chief Secretary, Treasury, to see the Chairman of the University Grants Committee and to ask him privately what view he thought his Committee would take of a decision that the Government
could not make available more than 3 per cent, this year, and what likely consequences this could set in train. The Chief Secretary has done this. Sir Keith Murray, who is not without understanding of the Governmenfs difficulties, said that in his judgment the University Grants Committee would say that the figure was quite unacceptable (they have already intimated that nothing far short of their original recommendation would in their view meet the need) and that they would probably instruct him to tell the Treasury that such a decision would seriously imperil "the University expansion programme. The University Grants Committee would need to withdraw as unreal their proposals and estimates for the forthcoming Quinquennium which they have just presented to the Treasury, and would have to go back to the Vice Chancellors to consult them about a revised plan for the Quinquennium, based on the lower number of staff available which would result from the Governmenfs decision. Before that point, he thought it would be essential for the Government to announce their decision publicly, because all the proposals for the Quinquennium could not be revised in detail on a new basis without a good many people getting to know about it. 13. The Chief Secretary asked Sir Keith Murray whether his Committee would really think that an increase of 3 per cent, operating on the academic year 1962-63, whatever it might be possible to decide in 1963 and onwards, would seriously hinder recruitment. He replied that it would and that whatever might happen in future years, such grave damage would have been done to the relations between the Universities and the Government that confidence in the Governmenfs attitude towards University expansion would take long to restore. 14. The Government are, in my view, on the horns of a dilemma. We cannot ignore the risk that a 3 per cent, decision will imperil the University expansion programme, and will alienate from the Government a great deal of thinking opinion, both in the Universities and elsewhere. It will seem completely inconsistent with what we have done for teachers and the staff of the Colleges of Advanced Technology. On the other hand we cannot ignore the risk that a decision by the Government to provide an additional 8 per cent, or 9 per cent, on the University salary "bill will undermine our whole policy of securing wage restraint in the coming year. A decision is urgent, because the University Grants Committee at their meeting on 17th January are expecting to know the Governmenfs views on their recommendations submitted six months ago. S. L.
Treasury Chambers, S.W. 1,
11th January, 1962.
THIS DOCUMENT IS THE PROPERTY OF HER BRITANNIC MAJESTYS GOVERNMENT
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12th January, 1962 CABINET
INCOMES P O L I C Y : T H E F U T U R E O F A R B I T R A T I O N MEMORANDUM BY THE CHANCELLOR O F THE EXCHEQUER
The Economic Policy Committee have discussed the attached memorandum by the Minister of Labour covering a paper by officials on the function of arbitration as part of the machinery for settling wages and salaries (Annex A). The Committee also had before them a memorandum by the Minister of Education, which is attached as Annex B. 2. Although arbitration is directly responsible for settling only a small percentage of disputes over the whole field (but a much higher proportion in the Civil Service), it is clearly important to ensure that Government policy on incomes should not be undermined by excessive arbitration awards. 3. In considering the part which arbitration should play, particularly in the intermediate phase following the end of the wage " pause ", we should consider the following four alternatives: (i) We could introduce legislation to impose an obligation on arbitrators to take into account the national interest when deciding their awards. Since recourse to arbitration is a voluntary matter in this country, the effect of such a step would be that few, if any, trade union negotiators would agree to take their cases to arbitration. The system would therefore cease to be a method of settling disputes unless the Government took the further step of making recourse to arbitration compulsory. It is certain that the British Employers' Confederation would join the trade unions in condemning the introduction of statutory control into arbitration. (ii) During the intermediate phase the Government might limit the implementation of arbitration awards in the public sector to an amount in their view consistent with the interim national incomes policy. The advantage of this course would be that, without controversial legislation, the Government would retain control over pay increases in the public sector and set an example to the private sector. There are, however, powerful arguments against this course. First, it could not really be represented as the restoration of independent arbitration. Secondly, it would certainly reduce the willingness of the Trades Union Congress to co-operate in the work of the National Economic Development Council. Thirdly, the Civil Service unions have already been given an assurance that arbitration arrangements will be restored at the end of the " pause ". T o go back on that assurance would not only increase bad staff relations in the Civil Service, but would result in a piling u p of salary increases arising from unimplemented arbitration awards, to the growing embarrassment of the Government. (These arguments are examined in greater detail in the memorandum.i(C. (62) 16) by the Chief Secretary, Treasury.) A more general argument against this course is that it ignores the that comparability with outside occupations is the only fair basis Civil Service pay. This principle goes back many years before Report of the Royal Commission on the Civil Service, 1953-55, under SECRET 60265
B
fact for the the
chairmanship of Sir Raymond Priestley. Under this system salaries in the public sector, especially the Civil Service, follow pay increases in the private sector. A policy of holding down the public sector may not succeed in moderating increases in the private sector, but may merely result in widening the differentials between the two groups. The real objective of the Governmenfs policy should be to restrain pay increases in the private sector, and in consequence, through the doctrine of comparability, pay increases in the public sector will also be moderated. (iii) The Government might say that they were prepared in principle to honour arbitration awards in the civil service, but should add that a level of wages based on fair comparison with outside occupations was a long-term objective. It should be accepted as part of the restoration of arbitration arrangements that the civil service must move more slowly towards those objectives, at a pace consistent with the growth of national productivity. They would serve notice on all concerned that in any arbitration proceedings the employers (i.e., the Government) would argue the case not only on comparability but more particularly on what could be afforded and on what the effect would be by an award in each case upon other awards on wages and upon the inflationary effects to the economy generally. If a public statement were made on these lines it might help to create an atmosphere which would affect the attitudes of arbitrators working in the rest of the public sector and in private industry. However, the Government would not remain immune from accusations by unions both in the public and private sectors that they were interfering with the freedom of arbitration. (iv) The Government might restrict its action to secure arbitration awards consistent with the national interest to the proposals put forward by the Minister of Labour in the memorandum attached at Annex A, i.e., (a) to publish a digest of current factual economic information and make it generally available to negotiators and arbitrators with a view to creating an informed opinion about the national interest in the level at which incomes are settled. Eventually this digest might be produced by the National Economic Development Council, but pending the setting up of that body it might be produced by the Ministry of Labour; (b) to strengthen the secretariat of arbitration bodies so that the relevant economic facts concerning the national interest are brought to the notice of arbitrators when they are considering the cases submitted by the parties to a dispute. If this course were followed, it could hardly be alleged that the Government were interfering with the freedom of arbitrators to reach their own decisions. It could of course be combined with the other courses mentioned above. 4. The Economic Policy Committee were generally agreed that an attempt to introduce statutory controls on arbitration awards would not lead to a solution of our difficulties. Discussion of the remaining alternatives showed some division of opinion on the best course to follow in present circumstances. In view of my discussions with the Trades Union Congress about their participation in the work of national planning, a decision on the line we should take about the scope of arbitration during the intermediate phase is urgent and I should welcome the views of my colleagues in the Cabinet on this matter. S. L.
Treasury Chambers, S.W. 1,
12 th January, 1962
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3
ANNEX A
INCOMES P O L I C Y : T H E F U T U R E O F A R B I T R A T I O N
MEMORANDUM BY THE MINISTER OF LABOUR
The attached paper has been prepared by my officials in consultation with the Treasury and other interested departments. It deals with arbitration as part of the machinery for the settlement of wages and salaries, and is intended—like the paper on incomes policy which the Chancellor circulated at the meeting of Cabinet on 14th December (C.C. (6.1) 74th Conclusions, Minute 6)—as a basis for further consideration of and consultation on future arrangements. 2. During the pause we have withdrawn the timing of pay increases from the scope of arbitration in the Civil Service. This has roused general distrust of the Governmenfs attitude towards arbitration. We must remove this if we want employers and trade unions to use arbitration when they cannot reach agreement by negotiation. Our system of voluntary arbitration works on the basis of consent by both parties, and will only be acceptable if arbitration is clearly recognised as independent of Government influence. 3. Therefore, whatever we might wish, it follows that the Government cannot give direct guidance to arbitrators about the scale of their awards or about the criteria they should apply to individual cases. Thus we cannot ensure that awards will invariably accord exactly with the Governmenfs view on what is required by the national economic situation. Only a strictly controlled system of compulsory arbitration, coupled with legal restrictions on the scope of free negotiation, could be brought into line in that way. That is not a practicable course. 4. It has been suggested that one way of introducing the national interest into voluntary arbitration would be to arrange for a third party to be present to give advice or provide information. If this third party were a representative of the Government it would be thought that direct Government influence was being brought to bear and this would certainly not be acceptable to the parties. If the third party were an independent person not associated with the Government this would also, I am afraid, be unacceptable to the parties. T h e trade unions do not believe that there is an " independent " view on wages and salaries; there is nobody above the battle. There is no equivalent of the amicus curiae who occupies a well understood position in the law courts. There would be obvious problems about selection, appointment and status of a third party. A particular difficulty would arise in the large proportion of cases where the Government are the employers and are presenting their own case to the arbitrator. I am sure that in present circumstances it would be impracticable for a third party to appear before an arbitrator to represent the national interest. 5. I have looked into the possibility of using existing powers in the Industrial Courts Act, 1919, to make rules of procedure so as to require arbitrators appointed under the Act to consider certain types of factual information of a wider nature than might be put to them by the parties. I have been advised by the Law Officers that rules with this scope cannot be made under the Act. New legislation would be needed, and it would be highly controversial. If it were introduced I a m convinced that the trade unions would not be prepared to use arbitration. 6. As I see it, our best hope of progress is to create an atmosphere in which arbitrators regard it as natural to take into account the national interest and the parties accept it as reasonable that they should do so. This must be part of the wider approach to the problem of inflation. We have to see that the economic facts of our situation are more widely understood, so that we may create an informed public opinion which is capable of exerting pressure on any group or section which is disposed to pursue its own narrow interest. I therefore.welcome the proposal in paragraph 19 of the officials' paper that we should publish a new digest of current factual information of the kind that is essential to the assessment—whether by negotiators or a r b i t r a t o r s - o f particular wage claims in fair perspective against the broad background of the national interest. 7. I propose also to make administrative arrangements to strengthen the secretariat of the Industrial Court and other arbitration bodies. At present my 60265
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Department provides, the secretariat for the Industrial Court, the Civil Service Arbitration Tribunal, all Wages Councils and all ad hoc boards of arbitration as well as the secretary of the Railways Staff National Tribunal. My officers are also responsible for arranging for one-man arbitrations. A strengthened secretariat could, therefore, be a powerful influence in co-ordinating arbitrators and ensuring that information about wage movements and other economic developments was brought to their notice. J. H. Ministry of Labour, 28th December,
S.W. 1,
1961.
NEGOTIATION
AND
ARBITRATION
MEMORANDUM BY OFFICIALS
General The Government have indicated that, taking the economy as a whole, it is essential that incomes should not rise faster than productivity if we are to make effective the general desire for high levels of employment, a more rapid rate o/ growth, and stable prices. Increases in wages, salaries and profits should be consistent with these economic objectives. 2. This paper deals with certain aspects of the settlement of wages and salaries. By whatever method these are settled—whether by negotiation, arbitration or statutory wage fixing machinery—the results affect not only the parties directly concerned but the continued prosperity and growth of the whole economy. All who are responsible for the settlement of wages and salaries have an obligation to consider, and let it be seen that they have considered, the wider implications of their decisions. Negotiation 3. There are about 22 million employees in the working population. In round figures, the wages, salaries and other conditions of employment of some 5 million of these are settled by direct arrangement between individual workers and their employers and of a further 4 million by statutory wage-fixing machinery. The wages, salaries and other conditions of employment of the remaining 13 million employees in private and nationalised industries, in central and local government and elsewhere are the subject of collective bargaining between representatives of employers and employees. The great majority of increases of wages and salaries for these 13 million employees are the outcome of settlements reached by agreement through negotiation between the two parties. This can be illustrated by reference to the addition t o the wages bill due to increases in weekly rates of wages of the 10 million manual workers within this group of 13 million employees. In both 1959 and 1960 negotiated agreements accounted for more than 95 per cent, of the addition. The results of collective bargaining also influence the wages and salaries fixed in other ways. . . 4. F r o m the national point of view, what is significant is the effect of all these separate negotiations. It is of the utmost importance that the parties to particular negotiations should not only take account of the interests of those immediately affected but should recognise a responsibility to apply to their particular circumstances and agreements the principle that increases in incomes should not exceed increases in national productivity. . ' Statutory tVage Fixing Machinery . - , .v-. * 5. T h e wages, salaries and conditions of employment of over 4 million employees in the industries covered by Wages Councils and: the Agricultural Wages Boards are settled through statutory arrangements. These arrangements provide for negotiation between representatives of employers and employees with the assistance of independent members who can exercise a deciding voice in the event
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of disagreement between the two parties. The arrangements combine features of negotiation and arbitration and it is appropriate, therefore, that those responsible for working these arrangements should also have regard to the principle that increases in incomes should be related to increases in national productivity. Arbitration - 6. Differences which are not settled by negotiation can be referred by agreement to independent arbitration. The circumstances in which they are referred, the terms of reference and the particular type of arbitration machinery used are matters for the parties. In a minority of industries, but including some very important ones particularly in the public sector, there is a standing commitment that differences which cannot be settled by negotiation will be referred to arbitration. In some others the question of using arbitration is considered by the parties on each occasion. 7. The possibility of arbitration is expressly provided for in national agreements covering about 6 million employees. There are such agreements in private and nationalised industry, the civil service and some local authority services. Where there is no specific provision on the subject arbitration is nevertheless used from time to time in other industries and services when the parties agree that it is appropriate. 8. Many industries and services make use of the statutory provisions for arbitration contained in the Conciliation Act, 1896 and the Industrial Courts Act, 1919. Under these Acts a difference can be referred to the Minister of Labour who may then, if both parties consent, refer the matter for settlement by arbitration. In many cases the parties expressly ask the Minister for arbitration. 9. The reference can be to the Industrial Court or to an individual arbitrator or to a board of arbitration. Certain industries and services, including, for example, the railways, coalmining and the civil service have arbitration machinery designed to meet their particular needs. 10. Recourse to arbitration is regarded by both parties as justified only if it is clear that a negotiated settlement cannot be reached, and in industry generally increases in wages and salaries are, therefore, determined by arbitration to a very small extent. For years previous to 1959, the influence of arbitration was increased by the statutory provisions of the Industrial Disputes Order. In .1959, after revocation of the Order, about 3 per cent, and in 1960 less than 1 per cent, of the addition to the wages bill due to increases in weekly wage rates of manual workers resulted from arbitration awards; special circumstances, including the disappearance after 18 years of the Industrial Disputes Tribunal and the special arrangements which governed reference to it may have tended to reduce the use of arbitration as a means of fixing wages and salaries in this relatively short period. It must also be remembered that arbitration may indirectly affect the outcome of collective bargaining. But these considerations d o not materially change the general picture. 11. The extent to which arbitration is used however varies greatly between employments. F o r example, from 1st January, 1959 to 31st October, 1961 the Civil Service Arbitration Tribunal alone dealt with 54 cases out of a total of 249, settled by arbitration under the Conciliation Act, 1896 and the Industrial Courts Act, 1919. In 1959, 93 per cent, and in 1960, 22 per cent, of the total cash increase in civil service salaries was due to awards by the Civil Service Arbitration Tribunal. 12. Arbitration provides a peaceful means of settling disputes which has been of great value in avoiding industrial strife The Government attach the highest importance to the maintenance of arrangements whereby disputes are referred by , . ; . . . ,. agreement to arbitration. i . f
13. This applies with particular force where arbitration, is most frequently used. In the summer of 1961 the Government took steps to bring about a pause in wage and salary increases in the civil service and other employments for which they are directly responsible. These steps included action to withdraw the timing of pay increases from the terms of reference t o arbitration in the civil service and the National Health Service. T h e Government decided on this action because in their view it would do less damage t o arbitration than any other course consistent with ensuring a pause in pay increases. T h e Government took this action on grounds of public policy in the special circumstances of the economic situation.
It was an act for the short term. It is the Governments intention that, as soon as circumstances permit, the timing of improvements in pay, etc., from dates after the end of the pause shall be referred to arbitration, as in the past, when it is necessary to do so. 14. The willingness of both parties to go to arbitration and not to take industrial action has been based on the recognition that it supplements the process of negotiation and is completely independent of outside influences. The Government recognise that arbitration will only operate effectively if arbitrators continue to exercise, and are seen to exercise, complete independence in making their awards. 15. Arbitration in the field of wages and salaries is a particular form of the well-known procedure whereby a referee is invited to decide between the conflicting views of two parties who have been unable to reconcile their differences by negotiation. The practice of appointing a referee is of long standing in the commercial field, where it is natural to regard it as an informal and expeditious substitute for litigation in the Courts. In such cases the arbitrator is expected to take cognisance only of the evidence and arguments put before him by the parties, just as if the case had been presented to a Court of Law for a judicial decision; and the arbitrator is not as a rule concerned with any other views that might be taken by other persons not directly involved, nor even with factual information which the two parties have not seen fit to lay before him. 16. But decisions affecting wages and salaries have implications for others besides the parties to a particular dispute. It is sometimes the practice for the parties to include in their evidence reference to developments in other employments and to the effects a wage increase might have on employment, costs, prices and production. Arbitrators are familiar with the possibility however that the parties may on occasion make too narrow an approach in pursuing their case. At times they have been criticised for dealing only with the particular case before them as a private issue between the two parties concerned, but in the complex economic situation of the post-war years arbitrators generally have become increasingly conscious of, and interested in, the wider implications of their awards. 17. If in the future we are to keep increases in incomes in line with increases in productivity this consciousness of the wider implications of arbitration awards will be of crucial importance. Arbitrators must be given an opportunity to consider all the information necessary to put the particular case before them into its proper perspective against the broad background of wages movements elsewhere, and other factors affecting the national economic situation. They must also have an opportunity to hear the views of the parties on the application to their case both of this information and of the general principle that incomes should not increase faster than national productivity. Publication of Factual Information 18. The application of this principle in negotiation and arbitration requires that comprehensive factual information on wage rates, earnings, hours of work and other conditions of employment, manpower, prices, production, profits and dividends and other relevant subjects should be readily available for use by the parties in negotiation or when reference is made to arbitration. 19. Much of this information is already published. The Government propose to supplement it and to make it generally available to employers' associations, trades unions, arbitrators and everyone concerned in a more convenient form by publishing a digest of the information at regular intervals.
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ANNEX B
INCOMES
POLICY-THE
FUTURE
OF
ARBITRATION
MEMORANDUM BY MINISTER OF EDUCATION
My own feeling about the Minister of Labour's paper (Annex A) is that a policy statement on those lines must suffer from the difficulty that we are still at an interim stage in the working out of a national wages policy of which a revised attitude—or rather climate of opinion—towards arbitration will form an essential part. But assuming we cannot avoid saying something on the latter subject at this stage, I would doubt whether we should be well advised to lay such emphasis as the note by officials does, in paragraph 12, on the importance which we attach to settlement by arbitration. If this has to be said, I would say it later and less emphatically after developing (as the note does in paragraph 17) our views on the way in which arbitrators should act. And I would make it clear that any such statement marks an interim view forming part of an interim policy on incomes. 2. This said, I welcome the idea of more factual information and the proposals of the Minister of Labour to strengthen the secretariat of the Industrial Court and other arbitration bodies. We want to see to it that employers generally are put in the best position to play the national hand. 3. I am bound, however, to warn my colleagues that the putting out of a statement of this kind, even if somewhat tempered in the way I have suggested, will make it more difficult for me to resist the strong pressures to which it is now clear that I shall be subjected to introduce formal arbitration arrangements into any revised set-up for negotiating teachers' salaries. It may be impossible in any event to resist provision for arbitration between both sides of the Burnham Committee if, as may happen, a demand for this is supported by the Authorities as well as the Teachers' Associations. But if the Government themselves restate their belief in arbitration and say that even where we provide the whole of the money, as in the National Health Service, or are in fact the employer, as with the Civil Service, we intend to continue to refer cases to arbitration, then it will not be easy to refuse the same to teachers in the full sense of arbitration between the Burnham Committee and the Government where we are unable to accept a Burnham Report. D . E. Ministry of Education,
Curzon Street, W. 1,
8th January, 1962.
DOCUMENT IS THE P R O P E R T Y O F H E R B R I T A N N I C M A J E S T V S G O V E R N M E N T )
C. (62) 10
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12th. J a n u a r y , 1962 CABINET
P A Y P O L I C Y FOR. T H E . P U B L I C S E R V I C E S DURING T H E ' INT E R M E ^ I A X E ^ E R I O D A ' 1
M e m o r a n d u m b y t h e Chief S e c r e t a ^ y ^ t o ^ I i e T r e a s u r y and P a y m a s t e r G e n e r a l In t h e p a p e r s e n t t o t h e C h a i r m a n of t h e E c o n o m i c C o m m i t t e e of the T r a d e s Union C o n g r e s s ( C . (62) 7), t h e C h a n c e l l o r of t h e E x c h e q u e r h a s o u t l i n e d h i s p r o p o s a l s f o r a p o l i c y on w a g e s a n d s a l a r i e s t o b e followed d u r i n g t h e p e r i o d a f t e r t h e e n d of t h e p a y p a u s e a n d b e f o r e t h e i n t r o d u c t i o n of a l o n g - t e r m p o l i c y on p e r s o n a l i n c o m e s . 2. On t h e a s s u m p t i o n t h a t a p o l i c y of t h i s g e n e r a l c h a r a c t e r on w a g e s and s a l a r i e s w i l l go f o r w a r d a f t e r t h e e n d of t h e p r e s e n t f i n a n c i a l y e a r , t h e G o v e r n m e n t m u s t d e c i d e h o w it s h a l l b e a p p l i e d in t h e p u b l i c s e r v i c e s f o r w h i c h it i s d i r e c t l y r e s p o n s i b l e . U r g e n t d e c i s i o n s a r e n e e d e d on t h i s b e c a u s e : (a) T h e T r a d e s Union C o n g r e s s a r e c e r t a i n t o a s k t h e d i r e c t q u e s t i o n : s e v e r a l p u b l i c s e r v i c e t r a d e u n i o n s a n d staff a s s o c i a t i o n s a r e affiliated t o t h e T r a d e s Union C o n g r e s s , and t h e G e n e r a l S e c r e t a r y of one of t h e m o s t i m p o r t a n t of t h e C i v i l S e r v i c e A s s o c i a t i o n s (the Union of P o s t Office W o r k e r s ) i n on t h e E c o n o m i c C o m m i t t e e i t s e l f : m o r e o v e r , s o m e of t h e g e n e r a l u n i o n s w i t h p o w e r f u l v o i c e s i n t h e T r a d e s Union C o n g r e s s ( e . g. , t h e T r a n s p o r t and G e n e r a l W o r k e r s ' Union) r e p r e s e n t i n d u s t r i a l g r a d e s in t h e C i v i l S e r v i c e a n d h a v e b e e n p a r t i c u l a r l y v o c a l in t h e i r c o m p l a i n t s , in p a r t i c u l a r a b o u t t h e M R a t e . (b) I h a v e t o m e e t t h e C i v i l S e r v i c e r e p r e s e n t a t i v e s on'l'6th Januax'y o r s o o n a f t e r , i n a c c o r d a n c e w i t h a n u n d e r t a k i n g g i v e n by t h e C h a n c e l l o r on 18th D e c e m b e r , t o d i s c u s s h o w C i v i l S e r v i c e p a y s h a l l b e h a n d l e d d u r i n g t h e i n t e r i m p e r i o d ; t h e " g o s l o w " of t h e C i v i l S e r v i c e C l e r i c a l A s s o c i a t i o n i s t o s t a r t on 17th J a n u a r y , a n d t h e r e m a y w e l l b e a d v a n t a g e in h o l d i n g t h i s m e e t i n g b e f o r e t h e n . 3,. The public s e r v i c e e m p l o y m e n t s likely to be m o s t i m m e d i a t e l y c o n c e r n e d i n t h e a p p l i c a t i o n of a n y n e w p o l i c y i n t h e f i r s t h a l f of 1962, are: (a) CjyiJjS e r v i c e , n o n - i n d u s t r i a l a n d i n d u s t r i a l - T h e r e i s a g e n e r a l c l a i m f o r a c e n t r a l p a y s e t t l e m e n t ( a b o u t 4 p e r c e n t ) in t h e n o n i n d u s t r i a l C i v i l S e r v i c e , e x c l u d i n g P o s t Office g r a d e s . T h e Union of P o s t Office W o r k e r s h a s an i n t e r i m c l a i m of a s i m i l a r a m o u n t , w h i c h h a s b e e n r e j e c t e d on m e r i t s a n d i s t h e c a u s e of t h e p r e s e n t " w o r k t o r u l e " ; but the P o s t m a s t e r G e n e r a l has m a d e c l e a r h i s willingness to n e g o t i a t e with t h e Union of P o s t Office W o r k e r s on t h e P a y R e s e a r c h Unit s u r v e y a f t e r i t h a s b e e n r e c e i v e d i n t h e s p r i n g . T h e r e a r e c l a i m s -1-
SESRET
for an a d d i t i o n a l 3 p e r c e n t on q u i t e d i f f e r e n t g r o u n d s f o r t h e S u b C l e r i c a l and C l e r i c a l c l a s s e s , a n d for t h e E x e c u t i v e O f f i c e r s . In the i n d u s t r i a l C i v i l S e r v i c e t h e r e i s t h e M R a t e a n d a m a j o r c l a i m f o r i m p r o v e m e n t s in t h e e n g i n e e r i n g o r E R a t e to c o n f o r m w i t h e a r n i n g s in the e n g i n e e r i n g i n d u s t r y . ( T h e r e i s p r o v i s i o n f o r c o m p u l s o r y a r b i t r a t i o n in t h e C i v i l S e r v i c e ) . (b) A r m e d F o r c e s - In a c c o r d a n c e w i t h t h e r e c o m m e n d a t i o n s of t h e A d v i s o r y C o m m i t t e e on R e c r u i t i n g u n d e r t h e c h a i r m a n s h i p of S;1r J a m e s G r i g g ( C m n d . 5 4 5 ) , t h e s e c o n d t w o - y e a r r e v i e w of t h e p a y of t h e f o r c e s b y r e f e r e n c e t o i n d u s t r i a l e a r n i n g s in t h e c a s e of o t h e r r a n k s , and C i v i l S e r v i c e E x e c u t i v e p a y in t h e c a s e of o f f i c e r s , i s n o w under way and i n c r e a s e s would n o r m a l l y bcannouneed during F e b r u a r y , t o t a k e effect on 1st A p r i l . T h e r e v i e w s e e m s l i k e l y t o p o i n t t o i n c r e a s e s s u b s t a n t i a l l y g r e a t e r t h a n Z\ p e r c e n t . ( T h e r e i s no a r b i t r a t i o n here.) (c) N u r s e s - T h e c l a i m i s f o r a 33 p e r c e n t i n c r e a s e . T h e M i n i s t e r of E d u c a t i o n s t a t e s t h a t a n " e c o n o m i c " i n c r e a s e would b e of t h e o r d e r of 5 p e r c e n t ; a n d i n c r e a s e r e l a t e d t o the p a y of n o n g r a d u a t e t e a c h e r s w o u l d be a b o u t 11 p e r c e n t . ( T h e r e i s p r o v i s i o n for a r b i t r a t i o n by c o n s e n t , b u t t h e M i n i s t e r i s not b o u n d t o a c c e p t awards.) (d) University t e a c h e r s - The University G r a n t s C o m m i t t e e , who a r e t h e G o v e r n m e n t s o f f i c i a l a d v i e r s h e r e , h a v e s u b m i t t e d r e c o m m e n d a t i o n s t h a t w o u l d a m o u n t to a 17 p e r c e n t i n c r e a s e . ( T h e r e i s no p r o v i s i o n f o r a r b i t r a t i o n . ) T h e r e i s a l s o an i m p o r t a n t c l a i m on b e h a l f of l o c a l a u t h o r i t y s a l a r i e d staff, w h i c h i s p a r a l l e l e d f o r s i m i l a r staff i n t h e e l e c t r i c i t y and g a s i n d u s t r i e s a n d w o u l d u n d o u b t e d l y b e a f f e c t e d by p a y p o l i c y in the s e r v i c e s for w h i c h t h e G o v e r n m e n t a r e d i r e c t l y r e s p o n s i b l e . 4. In t h e c a s e of t h e C i v i l S e r v i c e t h e p o i n t s t o w h i c h t h e staff association l e a d e r s attach m o s t i m p o r t a n c e and which they will undoubtedly r a i s e with m e next w e e k a r e : (a) A r e t h e G o v e r n m e n t p r e p a r e d to r e s t o r e i n full r e c o u r s e to t h e C i v i l S e r v i c e A r b i t r a t i o n T r i b u n a l a n d t h e I n d u s t r i a l C o u r t ? (b) Is f a i r c o m p a r i s o n w i t h c o m p a r a b l e w o r k o u t s i d e t h e C i v i l Service to continue to be the b a s i s for d e t e r m i n i n g p a y ? Arbitration 5. T h e r i g h t c o u r s e , in m y v i e w , would b e to r e s t o r e in t h e p u b l i c s e r v i c e s the r i g h t s to a r b i t r a t i o n a s t h e y e x i s t e d b e f o r e t h e p a y p a u s e (not h o w e v e r p e r m i t t i n g a n y b a c k d a t i n g i n t o t h e p r e s e n t f i n a n c i a l y e a r ) but t o l e t it b e k n o w n t h a t m a n a g e m e n t s i d e s will a r g u e a s s t r o n g l y a s p o s s i b l e in n e g o t i a t i o n a n d i n a r b i t r a t i o n c o u r t s on the b a s i s of t h e c a s e p u t by t h e C h a n c e l l o r of t h e E x c h e q u e r t o t h e T r a d e s Union C o n g r e s s t h a t i n c r e a s e s in i n c o m e s d u r i n g 1962 ought n o t t o e x c e e d t h e a n t i c i p a t e d i n c r e a s e i n p r o d u c t i o n . T h i s i s s u r e l y t h e one c o u r s e w h i c h h a s a r e a s o n a b l e c h a n c e of a c c e p t a n c e b y t h e p u b l i c
s e r v i c e u n i o n s . T h e G o v e r n m e n t a r e b o u n d to r e s t o r e a r b i t r a t i o n in full in t h e p u b l i c s e r v i c e s , if t h e r e i s t o be any h o p e of t h e T r a d e s Union C o n g r e s s c o m i n g t o a n y s o r t of a g r e e m e n t w i t h t h e C h a n c e l l o r on t h e g e n e r a l p o l i c y . Of c o u r s e , if s u c h a g r e e m e n t w e r e r e a c h e d , it would give r e p r e s e n t a t i v e s of m a n a g e m e n t a m o r e p o w e r f u l c a r d t o p e r s u a d e a r b i t r a t o r s to h a v e r e g a r d t o t h e n a t i o n a l i n t e r e s t t h a n t h e y ever had before. 6. (a)
The a l t e r n a t i v e s to the above c o u r s e for the public s e r v i c e a r e : To w i t h d r a w t h e r i g h t of a r b i t r a t i o n a l t o g e t h e r .
(b) To s a y t h a t we w o u l d r e f u s e t o i m p l e m e n t a n a r b i t r a t i o n a w a r d t h a t w a s in e x c e s s of, s a y , Z\ p e r c e n t . (c) To i m p l e m e n t a r b i t r a t i o n a w a r d s up t o Z\ p e r c e n t , but to h o l d o v e r until t h e e n d of t h e i n t e r m e d i a t e p e r i o d a n y p a r t of a n a w a r d in e x c e s s of 2j p e r c e n t . Any of t h e s e c o u r s e s w o u l d , in m y j u d g m e n t , s t a n d no c h a n c e of a c c e p t a n c e by t h e staff a s s o c i a t i o n s o r t h e u n i o n s . T h e f i r s t two w o u l d , indeed, r e p r e s e n t m o r e s e v e r e r e s t r i c t i o n s to arbitration than was a p p l i e d d u r i n g t h e p a u s e i t s e l f . T h e t h i r d would s t o r e up f r e s h d i f f i c u l t i e s for t h e G o v e r n m e n t , b e c a u s e it w o u l d p i l e up i n c r e a s e s f o r t h e e n d of t h e i n t e r m e d i a t e p e r i o d a n d m a k e t h e t r a n s i t i o n t o t h e l o n g t e r m p o l i c y t h a t m u c h m o r e difficult.
7' E a s e m e n t in r a t e s u n i m p r o v e d f o r two o r t h r e e y e a r s A s s u m i n g that t h e r e is available a global s u m which would p e r m i t i n c r e a s e s of t h e o r d e r of ?.\ p e r c e n t , a d e c i s i o n i s n e e d e d on w h e t h e r i n c r e a s e s in t h e p u b l i c s e r v i c e s s h o u l d , w h e r e a c a s e f o r i n c r e a s e i s s u c c e s s f u l l y m a d e out, b e s t r i c t l y l i m i t e d t o a f l a t r a t e o£ Z\ p e r c e n t h o w e v e r l o n g o r s h o r t t h e p e r i o d s i n c e t h e l a s t pay r e v i e w . The C h a n c e l l o r s l e t t e r to the T r a d e s Union C o n g r e s s a c c e p t e d t h a t t h e r e would b e e x c e p t i o n a l c a s e s w h e r e c l a i m s f o r i n c r e a s e s above the n o r m could be s u s t a i n e d , as well a s c a s e s w h e r e i n d u s t r i e s c o u l d a f f o r d no i n c r e a s e s a t a l l . T h e C i v i l S e r v i c e g e n e r a l l y h a d i t s l a s t p a y i n c r e a s e t w e l v e m o n t h s a g o , b u t if we m a d e n o p r o - ' v i s i o n f o r e a s e m e n t in c a s e s w h e r e a s c a l e of p a y h a s b e e n u n c h a n g e d f o r a c o n s i d e r a b l e t i m e l o n g e r t h a n that, we w o u l d find o u r s e l v e s s t r u g g l i n g t o defend m a n i f e s t l y i n e q u i t a b l e o u t c o m e s , a n d m i g h t e x p o s e o u r s e l v e s t o the c h a r g e of c o m p l e t e l y i g n o r i n g t h e p r i n c i p l e of " f a i r c o m p a r i s o n " t o w h i c h t h e G o v e r n m e n t a r e at p r e s e n t c o m m i t t e d in this field. 8. If m y c o l l e a g u e s w i l l l e t m e k n o w t h e i r r e a c t i o n s t o t h e p o i n t s d i s c u s s e d in p a r a g r a p h s 5 - 7 a b o v e , 1 w i l l b e g u i d e d t h e r e b y w h e n I m e e t t h e Staff Side r e p r e s e n t a t i v e s .
H. E . T r e a s u r y C h a m b e r s , S. W. 1. 12th J a n u a r y , 1962 -3 . SEGFSET
C O P Y N O . a feP
6 . ( 6 2 ) 11 12th J a n u a r y , 1962 CABINET
P A Y CLAIMS Note b y t h e C h a n c e l l o r of t h e E x c h e q u e r I a t t a c h , as a b a s i s f o r o u r n e x t d i s c u s s i o n , a f a c t u a l p a p e r on the n e g o t a i t i o n s a b o u t p a y i n c r e a s e s , e t c . , f o r c o a l m i n e r s , g a s w o r k e r s , r a i l w a y w o r k e r s , London b u s m e n and n u r s e s .
S. L .
T r e a s u r y C h a m b e r s , S. W . 1 , 12th J a n u a r y , 1962
-1-
SEOTEY
ANNEX N E G O T I A T I O N S ON P A Y I N C R E A S E S COAL INDUSTRY a
CJ.ajm; £ l a w e e k i n c r e a s e i n b a s i c d a y w a g e r a t e and ( ) r e d u c t i o n in h o u r s of w o r k u n d e r g r o u n d f r o m 1% t o 7 a d a y . 3
0)
Last -^crease:
(i) I n c r e a s e s f o r d a y w a g e m e n of 5 s . a w e e k following a r b i t r a t i o n in t h e a u t u m n of I960 a n d a f u r t h e r 8 s . 6d. a w e e k in J a n u a r y , 1961. (ii)
R e d u c t i o n of h o u r s b y \ h o u r a day f r o m t h e b e g i n n i n g
of 1961. (c)
D a t e of n e x t m e e t i n g ;
17th J a n u a r y .
(d) Offer p r o p o s e d b y C o a l B o a r d ; I n c r e a s e of 6 s . a w e e k , p e r h a p s a c c e p t i n g 7 s . 6d. , if n e c e s s a r y , i n b a s i c d a y w a g e r a t e f r o m 1st A p r i l o r 1st M a y , 1962. T h i s w o u l d b e j u s t u n d e r 4 p e r c e n t on t h e p r e s e n t m i n i m u m d a y w a g e r a t e , b u t l e s s if c a l c u l a t e d on e a r n i n g s . The B o a r d would a s k t h e u n i o n t o a g r e e t o t h e m a i n t e n a n c e of e x i s t i n g p i e c e w o r k c o n t r a c t s . In t h i s w a y t h e i n c r e a s e in t h e t o t a l w a g e b i l l could b e k e p t down t o 2.\ p e r c e n t . (e) If not s e t t l e d b y n e g o t i a t i o n , t h e d i s p u t e w o u l d a u t o m a t i c a l l y go t o a r b i t r a t i o n ( N a t i o n a l R e f e r e n c e T r i b u n a l ) u n l e s s e i t h e r s i d e o b j e c t e d . T h e a w a r d would b e b i n d i n g on b o t h s i d e s . GASINDUSTRY a
( ) C l a i m : "A s u b s t a n t i a l i n c r e a s e " , l i k e l y t o b e r e l a t e d to t h e s e t t l e m e n t i n t h e e l e c t r i c i t y s u p p l y i n d u s t r y . T h i s v/as a 3 . 7 p e r c e n t i n c r e a s e in h o u r l y w a g e s w i t h a d d i t i o n a l r r a n o u n t s f o r c e r t a i n m e t u n d e r t h e u p s t a n d i n g w a g e a r r a n g e m e n t s , giving a n o v e r a l l i n c r e a s e i n e a r n i n g s of a b o u t 5 p e r c e n t . 0) Last i n c r e a s e ; 6 p e r cent, costing £ 3 million, in S e p t e m b e r , I960 (3d. an h o u r for u n s k i l l e d m a n u a l w o r k e r s a n d 3jrd. 4d. a n d 5d. a n h o u r for h i g h e r g r a d e s of s k i l l e d m a n u a l w o r k e r s ) . 3
c
( )
D a t e of n e x t m e e t i n g ^
24th J a n u a r y .
(d) Offer p r o p o s e d by G a s C o u n c i l : 2d. o r 2 f d . an h o u r (4 p e r c e n t o r 5 p e r c e n t ) f r o m 1st A p r i l , 1962, for u n s k i l l e d m e n , with s i m i l a r p e r c e n t a g e i n c r e a s e s for h i g h e r g r a d e s , but no upstanding wage a g r e e m e n t . Total cost would be about £ 2 f m i l l i o n . e
( ) A r b i t r a t i o n : A r b i t r a t i o n could not be r e f u s e d , and the a w a r d would be binding. The a w a r d would be unlikely to e x c e e d 5 p e r cent. -2SECRET
RAILWAYS a
( )
Clairrx; I n c r e a s e of 10 - 11 p e r c e n t .
(b)
Last increase;
(i) T h e " G u i l l e b a u d " s e t t l e m e n t p r o v i d i n g f o r a n 8 p e r c e n t i n c r e a s e for c o n c i l i a t i o n g r a d e s a n d a 10 p e r c e n t i n c r e a s e f o r s a l a r i e d staff a s f r o m J a n u a r y , I 9 6 0 . (ii) A r e d u c t i o n i n h o u r s w i t h o u t l o s s of p a y ( b r o a d l y e q u i v a l e n t t o a 5 p e r c e n t i n c r e a s e i n t h e b a s i c w a g e ) a s f r o m 1st J a n u a r y , 1962. (c)
D a t e of n e x t m e e t i n g ;
23rd January.
(d) Offer p r o p o s e d by C h a i r m a n of B r i t i s h T r a n s p o r t C o m m i s s i o n : 6 p e r c e n t i n c r e a s e a s f r o m 1st A p r i l , 1962. (e) A r b i t r a t i o n : R a i l w a y Staff N a t i o n a l T r i b u n a l . I t s f i n d i n g s a r e not l e g a l l y b i n d i n g , b u t t h e C o m m i s s i o n h a v e a l w a y s r e g a r d e d t h e m s e l v e s a s b o u n d b y t h e m ( s e e a l s o C. (62) 6)
.
B
LONDON B U S M E N (a)
Claim: (i) (ii)
"A s u b s t a n t i a l i n c r e a s e " . Woxh on S a t u r d a y t o c o u n t a s
time-and-a-half.
(iii) R e d u c e d h o u r s of w o r k on S a t u r d a y a n d S u n d a y . (b)
L a s t _increa.se; 18s. a w e e k ( a b o u t 9 p e r c e n t ) i n O c t o b e r , I 9 6 0 .
(c) D a t e of n e x t m e e t i n g ; 16th J a n u a r y , b u t t h e L o n d o n - T r a n s p o r t E x e c u t i v e h a / e a g r e e d t o m a k e n o offer t h e n . (d) Offer p r o p o s e d ,by L o n d o n T r a n s p o r t E x e c u t i v e : 10s. t o 12s. a w e e k ( 4 ^ t o S\ p e r c e n t ) . T h e f o l l o w i n g a l t e r n a t i v e o f f e r s h a v e b e e n m a d e d u r i n g t h e c o u r s e of n e g o t i a t i o n s : (i) A d i f f e r e n t i a l of 6 s . a w e e k f o r d r i v e r s a s c o m p a r e d w i t h conductors. (ii) A s c h e m e f o r s h a r i n g , on a fifty-fifty b a s i s b e t w e e n t h e Executive and the b u s m e n , the i n c r e a s e d profits r e s u l t i n g f r o m h i g h e r p r o d u c t i v i t y , e . g. f r o m n e w d e v e l o p m e n t s s u c h a s l a r g e r b u s e s . e
( )
Arbitration:
No s p e c i f i c p r o v i s i o n f o r a r b i t r a t i o n .
-3-
SEGFtET
NURSES a
( ) C l a i m : I n c r e a s e s f o r a l l g r a d e s a v e r a g i n g 33 p e r c e n t a t
a t o t a l c o s t of £ 5 2 m i l l i o n .
(b)
East increases: (i) 5 p e r c e n t in D e c e m b e r , I 9 6 0 .
(ii) R e v a l u a t i o n i n M a r c h , 1959, giving i n c r e a s e s r a n g i n g f r o m 4-3 p e r c e n t t o 24 p e r c e n t f o r d i f f e r e n t g r a d e s . (c)
D a t e of n e x t m e e t i n g :
13th F e b r u a r y .
(d)
Offer p r o p o s e d by H e a l t h M i n i s t e r s : F o r d e c i s i o n .
(e) A r b i t r a t i o n : A r b i t r a t i o n w o u l d r e q u i r e t h e c o n s e n t of t h e M a n a g e m e n t S i d e , w h i c h i t w o u l d b e u n p r e c e d e n t e d t o r e f u s e in a c l a i m of t h i s k i n d . T h e a w a r d m i g h t w e l l b e 11 - 15 p e r c e n t o r m o r e , a n d c o u l d h a r d l y b e r e j e c t e d o r m o d i f i e d ( a l t h o u g h p o w e r t o do s o e x i s t s ) in t h e a b s e n c e of a n y n e w a n d g e n e r a l G o v e r n m e n t p o l i c y t o w a r d s arbitration.
J a n u a r y , 1962
-4
COPY NO.
C. (62) 12 15th J a n u a r y , 1962
CABINET
VIS rr._TO_WEjST._B ERJ-iIN M e m o r a n d u m by t h e S e c r e t a r y of S t a t e for F o r e i g n A f f a i r s
My c o l l e a g u e s m a y b e i n t e r e s t e d t o h a v e t h e f o l l o w i n g n o t e s on t h e m a i n i m p r e s s i o n s w h i c h I d e r i v e d f r o m m y o n e - d a y v i s i t t o W e s t B e r l i n on 10th J a n u a r y , (a)
T h e Wall
T h e w a l l d i v i d i n g W e s t B e r l i n f r o m t h e E a s t e r n s e c t o r of t h e c i t y i s u g l y b o t h p h y s i c a l l y a n d m o r a l l y , W th t h e a d d i t i o n ox t a n k o b s t a c l e s , b a r b e d w i r e , d i t c h e s , e t c , b e h i n d i t , it h a s now. b e c o m e a n almost impenetrable obstacle to unauthorised passage. I was almost m o r e i m p r e s s e d , h o w e v e r , by t h e z o n a l b o r d e r b e t w e e n W e s t B e r l i n and E a s t G e r m a n y , T h i s h a s b e e n c l o s e d a n d w i r e d s i n c e 1952, b u t t h e E a s t e r n defences have been greatly strengthened since last August. H e r e the C o m m u n i s t s have now c r e a t e d what is c e r t a i n l y m e a n t t o be a p e r m a n e n t frontier with e l a b o r a t e b a r b e d w i r e e n t a n g l e m e n t s , a s t r e t c h of p l o u g h e d l a n d a n d w e l l c o n s t r u c t e d o b s e r v a t i o n t o w e r s e v e r y 100 y a r d s o r s o . T h i s i s on t h e p a t t e r n of t h e 800 m i l e z o n a l border between East and West G e r m a n y and, I believe, other f r o n t i e r s of C o m m u n i s t S t a t e s . It i s c l e a r t h a t a l l t h i s ie i n t e n d e d t o b r i n g a b o u t t h e l a s t i n g d i v i s i o n of G e r m a n y , w i t h an i s o l a t e d W e s t B e r l i n , u n t i l s u c h t i m e a s t h e w h o l e c o u n t r y i s r i p e t o go c o m m u n i s t . '\ (b)
M o r a l e of t h e P o p u l a t i o n
The Vfest B e r l i n e r s s e e m t o b e r e c o v e r i n g f r o m t h e i n i t i a l s h o c k of t h e e v e n t s of l a s t A u g u s t . F i g u r e s f o r i n d u s t r i a l p r o d u c t i o n , t r a d e , i n v e s t m e n t , e t c . , h a v e begvin t o m o v e u p w a r d s . T h e i n i t i a l tendency for people to leave the city for the F e d e r a l Republic is now l e s s m a r k e d , a n d t h e n e t l o s s of p o p u l a t i o n i s n o w j u s t o v e r 3 , 000 a m o n t h . T h e r e h a s b e e n a quite c o n s i d e r a b l e inflow of s k i l l e d w o r k e r s i n t o W e s t B e r l i n t o r e p l a c e w o r k e r s f r o m E a s t B e r l i n who c a n n o l o n g e r c r o s s the s e c t o r boundary. B a r g e f i r m s in West B e r l i n have been the best able to adjust t h e m s e l v e s to the new conditions by r a t i o n a l i s i n g t h e i r l a b o u r f o r c e a n d b r i n g i n g i n n e w labovir f r o m W e s t G e r m a n y ; s m a l l e r f i r m s a n d b u s i n e s s e s h a v e b e e n w o r s e h i t b y t h e l o s s of m a n p o w e r a n d a r e m o r e affected by t h e u n c e r t a i n t y a s t o t h e f u t u r e . T h e c r u e l l e s t a s p e c t of t h e w a l l i s t h e s e p a r a t i o n of f a m i l i e s a n d f r i e n d s a n d t h i s affects a v e r y l a r g e p e r c e n t a g e of t h e W e s t B e r l i n p o p u l a t i o n . B u t a p a r t - 1 -
SECSKET
f r o m t h i s I h e a r d l i t t l e g r u m b l i n g . I h e a r d nothing t o s u g g e s t t h a t t h e p o p u l a t i o n ^ m o r a l e (as G e n e r a l C l a y , P r e s i d e n t K e n n e d y ' s p e r s o n a l r e p r e s e n t a t i v e , s e e m s t o t h i n k ) n e e d s t o b e b o o s t e d by a d v e n t u r o u s o r p r o v o c a t i v e a c t i o n s on t h e p a r t of t h e W e s t e r n P o w e r s in r e l a t i o n t o m o v e m e n t in E a s t B e r l i n . The W e s t B e r l i n e r s s e e m t o b e g e t t i n g down t o the t a s k of m a k i n g t h e b e s t of t h e i r s i t u a t i o n . W e s t B e r l i n i s not a t p r e s e n t at any r a t e w i t h e r i n g on t h e v i n e . (c)
The n e e d for Sectxrity a n d C o n t i n u i t y
T h e r e i s , h o w e v e r , an obvious need for r e a s s u r a n c e about f u t u r e s e c u r i t y a n d c o n t i n u i t y of c o n d i t i o n s . F r e e a c c e s s t o W e s t G e r m a n y i s a b s o l u t e l y e s s e n t i a l if t h e life of t h e city i s t o b e m a i n t a i n e d a n d if t h i s is once b e l i e v e d t o b e i n j e o p a r d y , m o r a l e would u n d o u b t e d l y c o l l a p s e . F r o m t h i s 1 c o n c l u d e t h a t t h e b a s i s on w h i c h v/e a r e t r y i n g to find m e a n s of n e g o t i a t i o n w i t h t h e R u s s i a n s i s t h e r i g h t o n e . T h a t i s to s a y , t o r e a c h a m o d u s v i v e n d i w h i c h would e n s u r e g u a r a n t e e d continuity to p r e s e n t a c c e s s f a c i l i t i e s . So f a r a s the West B e r l i n e r s a r e c o n c e r n e d , t h i s i s the v i t a l q u e s t i o n . T h e y h a t e t h e E a s t G e r m a n r e g i m e a n d would be s h o c k e d if t h e W e s t r e c o g n i s e d it de j u r e . But t h e y would n o t b e u p s e t by m o r e de f a c t o r e c o g n i t i o n if it m e a n t s a f e r a c c e s s . (d)
Herr Brandt
The M a y o r of W e s t B e r l i n , H e r r B r a n d t , t y p i f i e s a n d r e f l e c t s t h i s r e l a t i v e l y c a l m and r a t i o n a l a t t i t u d e of t h e i n h a b i t a n t s and I h a v e no doubt t h a t he i s l a r g e l y r e s p o n s i b l e f o r t h e high s t a t e of m o r a l e . His m a i n c o n c e r n , a f t e r t h e m a i n t e n a n c e of t h e e c o n o m i c life of t h e c i t y , i s to o b t a i n a l l e v i a t i o n of t h e h u m a n s u f f e r i n g c a u s e d b y t h e w a l l . He i s fully in a g r e e m e n t w i t h t h e effort of t h e U n i t e d S t a t e s and t h e United K i n g d o m t o s e e k a n e g o t i a t i o n on f r e e a c c e s s a n d he i s r e a d y t o m a k e m o r e c o n c e s s i o n s in t h e d i r e c t i o n of d e a l i n g s with t h e D e u t s c h e D e m o k r a t i s c h e R e p u b l i k t h a n t h e F e d e r a l G o v e r n m e n t h a v e so f a r s e e m e d r e a d y f o r . Fox* e x a m p l e , h e would s e e n o o b j e c t i o n t o t h e E a s t G e r m a n G o v e r n m e n t b e i n g r e p r e s e n t e d on an i n t e r n a t i o n a l a c c e s s c o n t r o l a u t h o r i t y . Once fi-ee a c c e s s w e r e a s s u r e d h e would be w i l l i n g t o e n t e r i n t o d i s c u s s i o n with t h e E a s t G e r m a n a u t h o r i t i e s in o r d e r t o a r r a n g e s o m e f o r m of c o n t r o l l e d m o v e m e n t of p e r s o n s a c r o s s t h e s e c t o r b o r d e r . H e t h i n k s it s h o u l d be p o s s i b l e to a g r e e upon s o m e s y s t e m w h i c h would s a t i s f y t h e E a s t G e r m a n s that individuals who c a m e over to visit r e l a t i v e s , e t c . would r e t u r n a n d h e would give e v e r y p o s s i b l e u n d e r t a k i n g to t h i s effect s h o r t of r e t u r n i n g s u c h p e r s o n s by f o r c e . He h a s i n m i n d a t r i a l r u n of a few w e e k s t o s e e w h e t h e r s u c h a s y s t e m wotild w o r k . H e r r B r a n d t d o e s not t h i n k , h o w e v e r , t h a t any a p p r o a c h s h o u l d b e m a d e t o t h e E a s t G e r m a n s on t h e s e s u b j e c t s u n t i l t h e o u t c o m e of t h e M o s c o w p r o b e i s c l e a r e r . (e)
^^ZJiayi£d^ela^ons^
I f o r m e d a v e r y f a v o u r a b l e i m p r e s s i o n of t h e j u d g m e n t a n d good s e n s e of t h e B r i t i s h C o m m a n d a n t , G e n e r a l D e l a c o m b e , a n d I t h i n k t h a t t h e B r i t i s h m i l i t a r y and c i v i l i a n a u t h o r i t i e s a r e in good s h a p e . U n f o r t u n a t e l y t h e r e h a s b e e n s e r i o u s d e t e r i o r a t i o n in i n t e r - a l l i e d c o - o p e r a t i o n s i n c e t h e a d v e n t of G e n e r a l C l a y . B e f o r e h e c a m e , t h e t h r e e C o m m a n d a n t s took a l l t h e i r d e c i s i o n s a f t e r full c o n s u l t a t i o n w i t h e a c h o t h e r . Now, t h e - 2 -
II E G R E T
United States Commandant, G e n e r a l Watson, cannot speak authoritatively w i t h h i s c o l l e a g u e s and d e c i s i o n s w h i c h affect t h e i n t e r e s t s of a l l t h r e e A l l i e s a r e a l l t o o often t a k e n u n i l a t e r a l l y by G e n e r a l C l a y . G e n e r a l C l a y b e l i e v e s in a p o l i c y of t o u g h n e s s t o w a r d s t h e R u s s i a n s a n d t h e E a s t G e r m a n s a n d i s i m p a t i e n t of r e s t r a i n t w h e t h e r it b e f r o m t h e S t a t e D e p a r t m e n t o r f r o m Ms B r i t i s h and F r e n c h A l l i e s . The other A m e r i c a n s i n B e r l i n a p p e a r t o be c r i t i c a l of h i s p o l i c i e s . T h i s i s a d a n g e r o u s s i t u a t i o n ^fcdch I a m a s k i n g H . M . A m b a s s a d o r in W a s h i n g t o n to t a k e up with the United States Government. (f)
G onjclusj on -
-
My v i s i t h a s m a d e m e r a t h e r m o r e hopeful a b o u t t h e p r o s p e c t s of r e a c h i n g s o m e m o d u s v i v e n d i w i t h t h e R u s s i a n s o v e r B e r l i n . It s e e m s t o m e t h a t t h e y h a v e a l r e a d y o b t a i n e d t h e e s s e n t i a l e l e m e n t in w h a t t h e y w a n t by b u i l d i n g t h e w a l l a n d t h u s p r e v e n t i n g t h e d i s i n t e g r a t i o n of E a s t G e r m a n y a n d t h a t W e s t B e r l i n , s i n c e 13th A u g u s t , i s n o l o n g e r t h e t h o r n i n t h e i r s i d e t h a t it w a s . One c a n n c t be d o g m a t i c a b o u t t h i s y e t , b e c a u s e t h e s i t u a t i o n i n s i d e E a s t G e r m a n y is s t i l l v e r y b a d f r o m t h e c o m m u n i s t p o i n t of v i e w b o t h e c o n o m i c a l l y and p o l i t i c a l l y . But, if E a s t G e r m a n y b e c o m e s m o r e of a going c o n c e r n i n t h e m o n t h s a h e a d , a n d if a r e a s o n a b l y i v i a b l e w a y of life c a n be found f o r W e s t B e r l i n , t h e r e i s no r e a s o n why t h e two s i d e s c o u l d not a g r e e to l e a v e t h e c i t y a s i t i s , w i t h W e s t e r n p r o t e c t i o n a n d a c c e s s g u a r a n t e e d on a b a s i s w h i c h w o u l d n o t do v i o l e n c e t o t h e a u t h o r i t y of E a s t G e r m a n y .
H.
F o r e i g n Office,
S.Yf.1.
15th J a n u a r y , 1962
3
Printed for the Cabinet. .
January 1962 ^
:
Copy N o .
C. (62) 13
6 0
19th January, 1962
CABINET
COSTS O F U N I T E D N A T I O N S O P E R A T I O N S IN T H E
CONGO
MEMORANDUM BY THE SECRETARY OF STATE FOR FOREIGN AFFAIRS
Last December the General Assembly voted $80 million to finance the Congo operation from November 1961 to June 1962: the United Kingdom's share will be about $6 million or just over £2 million. We should normally expect to pay at least part of our contribution fairly soon, perhaps in the latter part of January. We also owe about £688,000 for the previous financing period of January to October 1961, this being the balance of certain sums held in suspense to offset the cost of services rendered to the United Nations by the Air Ministry (see paragraph 3 below). 2. It has been suggested in Parliament and in the country at large that We should discontinue payment of our contributions to the Congo operation, at least until we are satisfied that it is conducted in a responsible manner and in accordance with the United Nations Charter. There are several arguments against taking this course, however, some of them very strong. I list them as follows: (i) According to our own declared interpretation of the Charter, we are under a legal obligation to pay these contributions, and our failure to do so would eventually expose us to the penalty of loss of vote in the General Assembly as provided for by Article 19 of the Charter. We have recently co-sponsored a resolution in the General Assembly seeking from the International Court of Justice an advisory opinion on the legal obligation of members to pay their assessed contributions to United Nations operations in the Congo and the Middle East. A decision not to pay would therefore embarrass us in the proceedings before the Court. Furthermore, there is good reason to expect that the Courfs opinion will be affirmative and, if we were meanwhile to default on our Congo payments, we should be faced with the choice between paying u p belatedly or flouting the opinion of the Court. (ii) Our refusal to pay would not, by itself, bring the Congo operation to an end for want of funds. The sale of an issue of United Nations bonds, to which the United States has declared its intention of subscribing generously, probably means that sufficient money will be available to continue a Congo operation for at least 12 months. A United Kingdom default would reduce our ability to influence United Nations operations and place us in much the same position as France, whose views on the Congo appear to carry little or no weight outside the " Brazzaville " States. (iii) If the United Kingdom defaults on the Congo account, the United States will be the only one of the five permanent members of the Security Council continuing to pay. As the recent official talks in Washington have confirmed, the United States Administration attach the greatest importance to our supporting them in providing financial backing for CONFIDENTIAL
60286
(iv) (y)
(vi)
(vii)
the United Nations. A default by us would therefore be damaging to our relations with the United States Government. We might also have to expect that our action would have a profound effect on United States opinion—Congressional and public—leading to a pressure for a partial withdrawal of United States support for the United Nations. This could only be to the benefit of the Soviet bloc. Other Commonwealth countries (and not only the New Commonwealth) are strongly behind the United Nations. Our default would undoubtedly damage Commonwealth relations. A default would also call into question our support for the United Nations as a whole. It may be that the conduct of the United Nations would become so intolerable that we would have to withdraw our support; but that time is not yet and I hope it will not come. The United Nations maintains a force of 5,000 troops on the Egypt-Israel border and in a vital position on the Gulf of Aqaba. This force makes an important contribution to the stability of the area as a whole and it is a United Kingdom interest to sustain it; but we should find it more difficult to resist Soviet or Arab pressure to wind up the operation if we had ourselves refused to pay our Congo contribution. T o withhold our contribution would certainly provide our balance of payments with small, but welcome, relief. It might well, however, for the reasons given above, do great harm to our own long-term interests.
Recommendations 3. F o r these reasons I recommend that we continue to pay our assessed Congo contributions, at least for the present. I propose, however, that we make payments only in respect of current United Nations expenditure on the Congo from month to month, and not in advance. I propose also that we continue to make air support available, on request, to the United Nations and, in particular, to the Nigerian contingent in the Congo, against repayment; and that, pending reimbursement (we are still negotiating with the United Nations about this), we should continue to hold back a corresponding sum from our Congo contribution. H.
Foreign Office, S.W. 1, 18th January,
1962.
C. (62) 14
C O P Y NO.
CABINET
U N I T E D NATIONS BOND ISSUE M e m o r a n d u m by t h e S e c r e t a r y of S t a t e jfor Foreign Affairs
The U n i t e d N a t i o n s f a c e s a d e f i c i t of m o r e t h a n $100 m i l l i o n c a u s e d by the r e f u s a l of t h e S o v i e t b l o c and o t h e r s t o p a y t h e i r s h a r e of the c o s t s of U n i t e d N a t i o n s o p e r a t i o n s in t h e M i d d l e E a s t and in the Congo. Until n o w t h i s d e f i c i t , w h i c h h a s b e e n r i s i n g s t e a d i l y and is l i k e l y t o r e a c h $170 m i l l i o n by J u n e t h i s y e a r , h a s b e e n p a r t i a l l y c o v e r e d by b o r r o w i n g w i t h i n the U n i t e d N a t i o n s s y s t e m ( f r o m v o l u n t a r y f u n d s , e t c . ) , by e x h a u s t i n g t h e $25 m i l l i o n c a s h f l o a t , a n d by p o s t p o n i n g t h e p a y m e n t of b i l l s . Of t h i s $170 m i l l i o n , $80 m i l l i o n w i l l r e p r e s e n t u n p a i d b i l l s a n d $90 m i l l i o n b o r r o w i n g f r o m o t h e r funds. At t h e end of l a s t y e a r t h e S e c r e t a r y - G e n e r a l , a c t i n g on United S t a t e s i n s p i r a t i o n , p r o p o s e d t o float a b o n d i s s u e of $200 m i l l i o n t o m e e t t h i s e m e r g e n c y . T h i s w a s a p p r o v e d by the G e n e r a l A s s e m b l y by 58 v o t e s ( i n c l u d i n g t h e U n i t e d K i n g d o m ) to 13, with 24 a b s t e n t i o n s . A g a i n on U n i t e d S t a t e s i n i t i a t i v e , a n d with U n i t e d K i n g d o m s u p p o r t , t h e G e n e r a l A s s e m b l y a l s o a t t e m p t e d t o t a c k l e t h e r o o t p r o b l e m - t h a t of g e t t i n g d e f a u l t e r s t o p a y up by a s k i n g the I n t e r n a t i o n a l C o u r t t o give an a d v i s o r y opinion w h e t h e r a m e m b e r G o v e r n m e n t w a s l e g a l l y o b l i g e d to p a y i t s s h a r e of t h e e x p s n c e s of t h e o p e r a t i o n s in. t h e M i d d l e E a s t and t h e C o n g o . 2. The B o n d i s s u e is d e s i g n e d t o r a i s e s u f f i c i e n t c a s h to k e e p the O r g a n i s a t i o n s o l v e n t in 1962 and at l e a s t p a r t of 1963, a n d to e n a b l e i t s o p e r a t i o n s i n t h e C o n g o and in the M i d d l e E a s t t o continue. Bonds can be p u r c h a s e d by m e m b e r and n o n - m e m b e r G o v e r n m e n t s and by n o n - p r o f i t - m a k i n g institutions; they a r e r e - p a y a b l e o v e r t e n y e a r s out of t h e r e g u l a r b u d g e t , w h i c h w i l l be i n c r e a s e d by $10 m i l l i o n e a c h y e a r for t h i s p u r p o s e , a n d t h e y w i l l b e a r i n t e r e s t of 2 p e r c e n t . 3. Ytfhen we d e c i d e d t o v o t e for t h e Bond i s s u e we h a d r e s e r v a t i o n s , w h i c h we m a d e c l e a r t o t h e U n i t e d S t a t e s at t h e t i m e : (i)
It w o u l d do n o t h i n g t o s o l v e the r o o t p r o b l e m of m a k i n g t h e l a r g e p a r t of t h e m e m b e r s h i p , w h i c h d e f a u l t s in p a y m e n t s f o r t h e s e U n i t e d N a t i o n s operations, pay up. In f a c t , i t would t e n d t o encourage financial i r r e s p o n s i b i l i t y ; since the c o u n t r i e s a l r e a d y in d e f a u l t would n o t s u b s c r i b e to t h e B o n d s , t h e c o u n t r i e s w h i c h m e e t t h e i r o b l i g a t i o n s would in effect b e p a y i n g t w i c e o v e r to c o v e r the d e f a u l t e r s . -1-
CONFIDENTIAL
r
(ii)
In o u r v i e w , $200 m i l l i o n i s u n n e c e s s a r i l y l a r g e to m e e t the i m m e d i a t e u n c o v e r e d deficit. If a l l the E o n d s a r e p u r c h a s e d , it m a y p r o v i d e t h e U n i t e d N a t i o n s w i t h a s u r p l u s w h i c h could e n c o u r a g e e x t r a v a g a n c e o r i r r e s p o n s i b l e u s e by t h e A f r o - A s i a n m a j o r i t y ( e . g. , t h e m o u n t i n g of another p e a c e and security operation in, say, Angola). The United States a u t h o r i t i e s thern s e l v e s h a v e s a i d t h a t t h e y r e g a r d a n y p a r t of t h e $200 m i l l i o n n o t r e q u i r e d t o f i n a n c e t h e deficit as a pool available for p e a c e and s e c u r i t y purposes.
4. With r e g a r d to t h e s e c o n d of t h e s e r e s e r v a t i o n s i t i s t r u e t h a t e v e n if t h e i s s u e w e r e fully s u b s c r i b e d t h e funds p r o v i d e d could b e c o n s u m e d by e x i s t i n g U n i t e d N a t i o n s o p e r a t i o n s b y t h e m i d d l e of 1963. In a n y c a s e , t h e p r e s e n t i n d i c a t i o n s a r e t h a t t h e g r e a t e r r i s k i s t h e o p p o s i t e one of the B o n d i s s u e f a i l i n g t o p r o v i d e e n o u g h t o k e e p the O r g a n i s a t i o n s o l v e n t . 5. If t h e B o n d i s s u e f a i l s , t h e U n i t e d N a t i o n s w o u l d f a c e financial collapse. T h i s would r e q u i r e a d r a s t i c c u r t a i l m e n t of i t s a c t i v i t i e s , and a l m o s t c e r t a i n l y m e a n that the o p e r a t i o n s in the M i d d l e E a s t and t h e Congo would h a v e t o b e r a p i d l y b r o u g h t to a n end without any a l t e r n a t i v e a r r a n g e m e n t s to take t h e i r p l a c e . It m i g h t p r e c i p i t a t e t h e end of t h e O r g a n i s a t i o n a l t o g e t h e r . Despite o u r m i s g i v i n g s a b o u t t h e U n i t e d N a t i o n s , we b e l i e v e t h a t it i s in t h e l o n g - t e r m i n t e r e s t s of t h e U n i t e d K i n g d o m t h a t i t s h o u l d b e p r e s e r v e d in b e i n g . It i s e s s e n t i a l for t h i s p u r p o s e t h a t t h e B o n d i s s u e s h o u l d succeed. 6. The United States A d m i n i s t r a t i o n have announced that t h e y p r o p o s e t o s u b s c r i b e $100 m i l l i o n ; b u t t h i s d e p e n d s on a p p r o v a l by C o n g r e s s , w h e r e t h e A d m i n i s t r a t i o n is l i k e l y t o f a c e g r e a t difficulty e s p e c i a l l y if t h e i r c l o s e a l l i e s h a v e not s h o w n . t h a t t h e y a r e w i l l i n g to s u p p o r t t h e U n i t e d S t a t e s e f f o r t . Congress m a y decide t h a t the a c t u a l U n i t e d S t a t e s c o n t r i b u t i o n s h o u l d b e r e l a t e d t o t h e c o n t r i b u t i o n s of o t h e r G o v e r n m e n t s . If we r e f u s e t o b u y a n y B o n d s , t h e r e is a r e a l danger that m a n y other p o t e n t i a l s u b s c r i b e r s will follow o u r l e a d and t h a t t h e w h o l e s c h e m e w i l l c o l l a p s e , b e c a u s e C o n g r e s s w i l l f a i l to a p p r o v e a d e q u a t e U n i t e d S t a t e s p a r t i c i p a t i o n . F o r t h e s e r e a s o n s , the United States G o v e r n m e n t a t t a c h e x t r e m e i m p o r t a n c e to our r e s p o n s e and a r e p r e s s i n g us to let t h e m know o u r i n t e n t i o n s w i t h i n t h e n e x t few d a y s . They have suggested t h a t we s h o u l d s u b s c r i b e $25 m i l l i o n . We h a v e a l r e a d y t o l d t h e m t h a t we c a n n o t h o p e t o go a s f a r a s t h i s , but t h e r e i s no d o u b t t h a t a f a i l u r e on o u r p a r t t o m a k e an a d e q u a t e r e s p o n s e w o u l d h a v e a s e r i o u s effect on A n g l o - A m e r i c a n r e l a t i o n s . We c o u l d n o t e x p e c t the United States A d m i n i s t r a t i o n to continue c o - o p e r a t i n g with us v e r y c l o s e l y on U n i t e d N a t i o n s q u e s t i o n s g e n e r a l l y , i n c l u d i n g f i n a n c i a l c o n t r o l , or h e l p i n g us on m a t t e r s l i k e c o l o n i a l i s m a s t h e y a r e n o w doing a n d w h i c h a r e of s p e c i a l i m p o r t a n c e t o u s ; -2-
CONF1DENTIAL
and we s h o u l d l o s e t h e g r o u n d w e g a i n e d l a s t w e e k in t h e A n g l o A m e r i c a n t a l k s in W a s h i n g t o n . F u r t h e r m o r e , we s h o u l d g r a v e l y d i s a p p o i n t m a n y of o u r f r i e n d s a m o n g t h e s m a l l e r c o u n t r i e s who s e t g r e a t s t o r e by t h e U n i t e d N a t i o n s . We s h o u l d b e r e g a r d e d by t h e m , a n d a c c u s e d b y u n f r i e n d l y c o u n t r i e s , of h a v i n g g i v e n up t h e O r g a n i s a t i o n a s a b a d j o b ; and o u r i n f l u e n c e with o t h e r d e l e g a t i o n s a n d w i t h t h e S e c r e t a r i a t would be g r e a t l y r e d u c e d . 7. I t h e r e f o r e c o n c l u d e t h a t t o p r e s e r v e the U n i t e d N a t i o n s in b e i n g , f o r t h e s a k e of o u r r e l a t i o n s w i t h t h e U n i t e d S t a t e s , a n d t h e m a i n t e n a n c e of o u r i n f l u e n c e m o r e g e n e r a l l y , i t i s e s s e n t i a l t h a t we s h o u l d s u b s c r i b e to t h e B o n d i s s u e . At t h e s a m e t i m e , we s h o u l d t a k e i n t o a c c o u n t o u r b a l a n c e of p a y m e n t s d i f f i c u l t i e s and the need to avoid p r e s e n t i n g the United Nations with a financial s u r p l u s . T h i s w i l l r e q u i r e a c e r t a i n f l e x i b i l i t y in t h e p a y m e n t of o u r c o n t r i b u t i o n a n d we s h o u l d c o m b i n e o u r p a y m e n t s w i t h c o n t i n u e d e f f o r t s to a c h i e v e b e t t e r s t a n d a r d s of p o l i t i c a l a n d financial r e s p o n s i b i l i t y within the O r g a n i s a t i o n . 8* T h e r e r e m a i n s t h e q u e s t i o n of t h e a m o u n t of o u r contribution. T h e o b v i o u s s t a n d a r d of r e f e r e n c e i s t h e p e r c e n t a g e a s s e s s m e n t for c o n t r i b u t i o n s to t h e o r d i n a r y U n i t e d N a t i o n s budget. In o u r c a s e t h i s is 7 58 p e r c e n t and for t h e U n i t e d S t a t e s 32 p e r c e n t . In s u g g e s t i n g t h a t we s h o u l d c o n t r i b u t e $25 m i l l i o n , t h e r e f o r e , the U n i t e d S t a t e s i n t e n t i o n w a s to p r e s e r v e t h e r a t i o betv^een o u r two a s s e s s m e n t s . T h e only o t h e r G o v e r n m e n t which h a s so far announced a decision is the Canadian. They p r o p o s e to s u b s c r i b e $ 6 . 24 m i l l i o n w h i c h i s in p r o p o r t i o n to t h e i r a s s e s s m e n t of 3.12 p e r c e n t . The S c a n d i n a v i a n s a n d Dutch a r e a l s o l i k e l y to buy B o n d s on t h e b a s i s of t h e i r a s s e s s m e n t of t h e regular budget. On t h e s a m e b a s i s , o u r c o n t r i b u t i o n would be $15.16 m i l l i o n . If our r e s o u r c e s c o u l d b e a r t h i s , , a c o n t r i b u t i o n of $15 m i l l i o n s h o u l d i n d u c e o t h e r s u b s c r i b e r s to follow,.suit a n d s a t i s f y C o n g r e s s , e v e n if we could n o t a c t u a l l y p a y m o r e t h a n o n e - h a l f o r t w o - t h i r d s b e f o r e 1963. k
9. At t h e o t h e r e n d of t h e s c a l e , a c o n t r i b u t i o n of $10 m i l l i o n i s t h e a b s o l u t e m i n i m u m w h i c h c o u l d be r e p r e s e n t e d a s a r e a s o n a b l e or respectable s h a r e . H o w e v e r , t h i s would g a i n u s l i t t l e c r e d i t w h e r e a s a s o m e w h a t l a r g e r offer, t h o u g h s t i l l s h o r t of o u r r e g u l a r a s s e s s m e n t p e r c e n t a g e , would b r i n g u s p o l i t i c a l b e n e f i t s , a t a t i m e l y m o m e n t f r o m the p o l i t i c a l p o i n t of v i e w , out of p r o p o r t i o n to the e x t r a cost. 10. The C h a n c e l l o r a n d the two p o s s i b i l i t i e s w o r t h of B o n d s n o w with o r a n u n d e r t a k i n g now t o
of t h e E x c h e q u e r a n d I h a v e t a l k e d t h i s o v e r s e e m t o u s t o be a n offer to b u y $5 m i l l i o n a p r o m i s e t h a t we w o u l d buy m o r e l a t e r , buy $12 m i l l i o n w o r t h .
-3-
CONFSDENTIAL
11. My own p r e f e r e n c e i s f o r t h e l a t t e r c o u r s e a n d I r e c o m m e n d it to m y c o l l e a g u e s . I w o u l d a l s o t e l l the U n i t e d S t a t e s G o v e r n m e n t t h a t we w e r e t a k i n g t h i s a c t i o n i n r e s p o n s e t o t h e i r r e q u e s t a n d in t h e c o n f i d e n c e t h a t t h e y w i l l w o r k j o i n t l y w i t h u s t o do e v e r y t h i n g p o s s i b l e to a c h i e v e h i g h e r s t a n d a r d s of p o l i t i c a l a n d f i n a n c i a l r e s p o n s i b i l i t y v/ithin t h e O r g a n i s a t i o n .
H.
F o r e i g n Office, S. W. 1. 19th J a n u a r y , 1962.
-A.
CONFIDENTIAL
C O P Y N O . £%'
2
Qth J a n u a r y . 1962
CABINET
LAOS M e m o r a n d u m by t h e S e c r e t a r y of S t a t e for F o r e i g n A f f a i r s The P r o b l e m I invite m y colleagues to c o n s i d e r the situation which will a r i s e in t h e n e a r f u t u r e if t h e G e n e v a C o n f e r e n c e b r e a k s d o w n . Present Position 2. The i n t e r n a t i o n a l a g r e e m e n t w h i c h h a s b e e n r e a c h e d in G e n e v a is b a s e d on t h e u n d e r s t a n d i n g t h a t a G o v e r n m e n t of N a t i o n a l Unity w i l l b e f o r m e d in L a o s f r o m t h e t h r e e p r i n c i p a l p a r t i e s , u n d e r t h e l e a d e r s h i p of P r i n c e S o u v a n n a P h o u m a . Without t h i s u n d e r s t a n d i n g a g r e e m e n t would not h a v e b e e n r e a c h e d . P r i n c e Boun O u m a n d G e n e r a l P h o u r a i a r e now s a y i n g t h a t t h e y a r e no l o n g e r w i l l i n g t o t a k e p a r t in s u c h a G o v e r n m e n t and t h a t t h e y c o n s i d e r t h a t P r i n c e S o u v a n n a P h o u m a s h o u l d w i t h d r a w f r o m t h e p o l i t i c a l s c e n e in f a v o u r of a G o v e r n m e n t t o b e h e a d e d b y t h e King of L a o s . T h e y t h u s p r o p o s e a d i f f e r e n t b a s i s f r o m t h a t on w h i c h t h e f o u r t e e n n a t i o n s in G e n e v a h a v e b e e n w o r k i n g , a n d t h e C o m m u n i s t P o w e r s will n o t w i s h to a c c e p t i t . 3. T h e r e a s o n s for t h i s d e v e l o p m e n t a r e t h a t G e n e r a l P h o u m i i s u n w i l l i n g t o r u n t h e r i s k of l o s i n g h i s p e r s o n a l p o w e r b y e n t e r i n g a g o v e r n m e n t in w h i c h he would no l o n g e r c o n t r o l t h e a r m y . R a t h e r t h a n t h i s he would p r e f e r t o g e t P r i n c e S o u v a n n a P h o u m a to l e a v e L a o s and to h a v e a d i r e c t c o n f r o n t a t i o n w i t h t h e C o m m u n i s t s , p e r h a p s l e a d i n g to h o s t i l i t i e s in w h i c h t h e A m e r i c a n s w o u l d be o b l i g e d to i n t e r v e n e r a t h e r t h a n s e e La.os o v e r r u n . We a n d t h e A m e r i c a n s h a v e t o l d G e n e r a l P h o u m i t h a t he ought t o a c c e p t P r i n c e S o u v a n n a P h o u m a ' s t e r m s for a n e w G o v e r n m e n t a n d c a n do so w i t h o u t r u n n i n g p r o h i b i t i v e r i s k s . 4. T h e Soviet C o - c h a i r m a n h a s w a r n e d u s t h a t we a r e now f a c i n g an e x t r e m e l y d a n g e r o u s s i t u a t i o n w h i c h m a y l e a d t o w a r . He h a s a s k e d us w h e t h e r we t h i n k t h a t t h e C o n f e r e n c e m i g h t be a b l e t o r e a c h a s e t t l e m e n t for L a o s w i t h o u t t h e p a r t i c i p a t i o n of P r i n c e Boun O u m a n d G e n e r a l Phoumi. T h e difficulty a b o u t t h i s i s t h a t a s e t t l e m e n t in w h i c h t h e y do not p a r t i c i p a t e w i l l l e a v e G e n e r a l P h o u m i f r e e t o w i t h d r a w t h e L a o t i a n a r m y i n t o t h e South a n d s p l i t t h e K i n g d o m , o r t o s t a g e a f r e s h coup d ' e t a t . M e a n w h i l e t h e R u s s i a n s a r e doubtful a s t o w h e t h e r it w i l l b e p o s s i b l e to m a i n t a i n t h e c e a s e f i r e ; t h e y p r o b a b l y f e a r t h a t t h e N o r t h V i e t n a m e s e and the P a t h e t Lao will p r e c i p i t a t e f r e s h fighting. -1
kj^mediateJPoljcy 5. I think t h a t t h e f i r s t s t e p to r e m e d y t h i s s i t u a t i o n m u s t b e a. r e n e w e d e f f o r t to g e t a u n i f i e d L a o t i a n G o v e r n m e n t u n d e r P r i n c e S o u v a n n a P h o u m a . T h e l i k e l i h o o d of G e n e r a l P h o u m i f r u s t r a t i n g t h i s d e p e n d s on w h e t h e r he t h i n k s t h a t in t h e l a s t r e s o r t he w i l l c o n t i n u e t o g e t A m e r i c a n s u p p o r t if h e f o r c e s a b r e a k d o w n of t h e G e n e v a C o n f e r e n c e . He h a s a l r e a d y b e e n w a r n e d by the U n i t e d S t a t e s A s s i s t a n t S e c r e t a r y of S t a t e f o r F a r E a s t e r n Affairs, M r . H a r r i m a n , that he will not, and that i n s t e a d he w i l l find h i s a r m y d e p r i v e d of s u p p l i e s and f a c i l i t i e s . He m a y w e l l c o n s i d e r t h a t t h e A m e r i c a n s a r e bluffing and t h a t if h e h o l d s out t h e y w i l l e v e n t u a l l y h a v e to s u p p o r t h i m r a t h e r t h a n r i s k s e e i n g t h e L a o t i a n a r m y d i s i n t e g r a t e a n d t h e r i g h t - w i n g in L a o s c o l l a p s e . It i s t h e r e f o r e e s s e n t i a l t h a t the A m e r i c a n s s h o u l d t a k e s o m e t o k e n a c t i o n a g a i n s t t h e a r m y to show that they r e a l l y m e a n b u s i n e s s . T h e y h a v e not y e t done t h i s - t h e y f e a r t h a t o n c e t h e y s t a r t t h e y w i l l h a v e t o c a r r y t h r o u g h a long t e s t of s t r e n g t h w i t h G e n e r a l P h o u m i w h i c h c o u l d s e r i o u s l y w e a k e n t h e a r m y . T h i s i s n o t t h e v i e w of o u r A m b a s s a d o r a n d o t h e r f o r e i g n o b s e r v e r s who t h i n k t h a t G e n e r a l F h o u m i w i l l r a p i d l y give w a y . 6. It i s s t i l l j u s t p o s s i b l e t h a t M r . H a r r i m a n ' s w a r n i n g s will b r i n g G e n e r a l P h o u m i t o r e a s o n . T h i s s h o u l d b e c o m e c l e a r in G e n e v a o v e r t h e w e e k e n d . But if o u r a t t e m p t s f a i l and n e g o t i a t i o n s f o r t h e f o r m a t i o n of a g o v e r n m e n t a r e a b a n d o n e d , it w i l l b e i m p o s s i b l e t o k e e p the G e n e v a C o n f e r e n c e g o i n g . If w e l o s e t h e C o n f e r e n c e w e m u s t t r y at l e a s t to e n s u r e t h a t t h e m a c h i n e r y of t h e C o - c h a i r m e n i s k e p t i n b e i n g to p r e v e n t a r e n e w a l of f i g h t i n g . I w o u l d h o p e t o r e a c h an a g r e e m e n t with t h e S o v i e t C o - c h a i r m a n t h a t h e w o u l d r e s t r a i n h i s a l l i e s a n d t h e P a t h e t L a o f r o m any b r e a c h of t h e c e a s e f i r e ; in r e t u r n we w o u l d o b t a i n for t h e R u s s i a n s an a s s u r a n c e f r o m t h e A m e r i c a n s t h a t t h e y would e x e r t s i m i l a r control over the T h a i s , South V i e t n a m e s e and G e n e r a l F h o u m i . Such an a r r a n g e m e n t , h o w e v e r , c o u l d n o t b e e x p e c t e d to l a s t f o r v e r y l o n g , and A m e r i c a n p r e s s u r e w o u l d h a v e to c o n t i n u e t o be a p p l i e d t o G e n e r a l P h o u m i in t h e h o p e s of f o r c i n g t h e V i e n t i a n e G o v e r n m e n t into f r e s h w i l l i n g n e s s to j o i n a u n i f i e d g o v e r n m e n t u n d e r P r i n c e S o u v a n n a Phouma. 7. The t h i r d a n d f i n a l s t a g e w o u l d b e if t h e c e a s e f i r e b r o k e down and hostilities began. Although the A m e r i c a n s have told G e n e r a l P h o u m i t h a t t h e y w i l l not s u p p o r t h i m if he t a k e s t h e i n i t i a t i v e in p r o v o k i n g h o s t i l i t i e s , i t is u n l i k e l y t h a t f i g h t i n g w o u l d b e g i n in a c l e a r - c u t m a n n e r a n d it m i g h t b e difficult t o p i n t h e b l a m e on G e n e r a l P h o u m i . W h a t e v e r the c i r c u m s t a n c e s in w h i c h the w a r b r e a k s out a g a i n , if G e n e r a l P h o u m i i s e v e n t u a l l y d r i v e n b a c k ( a s in t h e e n d w o u l d a l m o s t c e r t a i n l y - h a p p e n ) it w i l l b e e x t r e m e l y difficult for t h e A m e r i c a n s t o s t a n d b y a n d w a t c h Laos being o v e r r u n . T h e y do n o t a t p r e s e n t k n o w w h a t t h e y w o u l d do in s u c h c i r c u m s t a n c e s . T h e P r e s i d e n t ' s i n s t r u c t i o n s to M r . H a r r i m a n are:- " (i)
T h a t he s h o u l d n o t a l l o w L a o s to b e o v e r r u n b y t h e Pathet Lao a r m i e s .
(ii)
T h a t he s h o u l d b y a l l m e a n s a v o i d the i n v o l v e m e n t of A m e r i c a n t r o o p s in L a o s . -2
These i n s t r u c t i o n s m a y p r o v e h a r d to r e c o n c i l e . If t h e A m e r i c a n s do i n t e r v e n e t h e r e w i l l be a n a p p e a l f o r a c t i o n by t h e South E a s t A s i a T r e a t y O r g a n i s a t i o n (SEATO) a n d we s h a l l h a v e t o c o n s i d e r w h e t h e r t o t a k e p a r t or not. O u r Cjommifcrn^nts^ 8. O u r own g e n e r a l c o m m i t m e n t a r i s e s f r o m o u r m e m b e r s h i p of SEATO. U n d e r A r t i c l e 4 we a r e o b l i g e d t o " a c t t o m e e t t h e c o m m o n d a n g e r in a c c o r d a n c e w i t h ( o u r ) c o n s t i t u t i o n a l p r o c e s s e s " in t h e e v e n t of a g g r e s s i o n by m e a n s of an a r m e d a t t a c k a g a i n s t L a o s . Eut this would only a p p l y s t r i c t l y in the e v e n t of N o r t h V i e t n a m e s e i n t e r v e n t i o n i d e n t i f i a b l e a s an a r m e d a t t a c k f r o m o u t s i d e , a n d o u r o b l i g a t i o n in t h e c a s e of r e s u m p t i o n of a c t i o n w i t h the F a t h e t L a o not i n v o l v i n g t h i s w o u l d be l i m i t e d t o " c o n s u l t i n g i m m e d i a t e l y in o r d e r t o a g r e e on the m e a s u r e s w h i c h s h o u l d be t a k e n for t h e c o m m o n d e f e n c e " . However, when the P r i m e M i n i s t e r v i s i t e d P r e s i d e n t K e n n e d y at Key W e s t in M a r c h , 1961, H e r M a j e s t y ' s G o v e r n m e n t a g r e e d t h a t in t h e e v e n t of A m e r i c a n i n t e r v e n t i o n in L a o s B r i t i s h f o r c e s would p a r t i c i p a t e . But t h i s w a s for t h e s p e c i f i c and e x p r e s s p u r p o s e of k e e p i n g a f o o t h o l d in L a o s u n t i l a n e g o t i a t i o n c o u l d be s t a r t e d . The s i t u a t i o n h a s r a d i c a l l y c h a n g e d s i n c e t h e n - i n t e r n a t i o n a l a g r e e m e n t h a s b e e n r e a c h e d and a s e t t l e m e n t of t h e c i v i l w a r i s b e i n g o b s t r u c t e d only by t h e r e f u s a l of t h e V i e n t i a n e G o v e r n m e n t to p a r t i c i p a t e . While t h i s g r o u p h a s r e a s o n for v i e w i n g w i t h s o m e s u s p i c i o n t h e s e t t l e m e n t w h i c h h a s b e e n o f f e r e d , I do not b e l i e v e t h a t t h e i r r e f u s a l t o a c c e p t it i s j u s t i f i e d . 9. M i l i t a r y p l a n s h a v e b e e n w o r k e d out by S E A T O for i n t e r v e n t i o n in L a o s and t h e C h i e f s of Staff a n d the B r i t i s h D e f e n c e C o - o r d i n a t i o n C o m m i t t e e , F a r E a s t , h a v e d e t a i l e d p l a n s for t h e m o v e m e n t of B r i t i s h troops. B r i t i s h f o r c e s c o u l d b e i n p o s i t i o n in L a o s w i t h i n t e n d a y s of the d e c i s i o n t o i n t e r v e n e .
10. We m u s t c o n s i d e r w h e t h e r we s h o u l d now m a k e o u r own p o s i t i o n quite c l e a r to t h e A m e r i c a n s . Any e x p l a n a t i o n m i g h t c o v e r t h e f o l l o w ing p o i n t s : (i) We b e l i e v e t h a t t h e r e f u s a l of t h e V i e n t i a n e G o v e r n m e n t t o j o i n a G o v e r n m e n t of N a t i o n a l Unity u n d e r P r i n c e S o u v a n n a P h o u m a i s b a s e d on t h e b e l i e f t h a t t h e W e s t w i l l not a b a n d o n t h e m if n e g o t i a t i o n s b r e a k down a s a r e s u l t of t h e i r o b s t i n a c y . We a r e t h e r e fore grateful for the efforts which the A m e r i c a n s have m a d e to convince G e n e r a l P h o u m i that this is not the c a s e . We b e l i e v e , h o w e v e r , t h a t s o m e definite s a n c t i o n s w i l l h a v e to be t a k e n now if the G e n e r a l i s to be c o n v i n c e d t h a t t h e A m e r i c a n s r e a l l y m e a n what they s a y .
SEGRET
s
T
(ii) We h a v e b e e n r e - e x a m i n i n g o u r a t t i t u d e w i t h r e g a r d t o L a o s in t h e l i g h t of t h e p r e s e n t s i t u a t i o n . Our difficulty a r i s e s f r o m t h e fact t h a t t h e r e i s no l o n g e r a r a t i o n a l and r e p r e s e n t a t i v e G o v e r n m e n t i n L a o s w i t h w h o m we c a n d i s c u s s t h e a p p l i c a t i o n of o u r c o m m i t m e n t s to t h e i r country. Our relations a r e in t h e h a n d s of G e n e r a l P h o u m i who i s a c t i n g a s an i n d e p e n d e n t a u t o c r a t i c r u l e r w i t h o u t r e g a r d to t h e s a f e t y a n d w e l f a r e of t h e K i n g d o m of L a o s . We shall t h e r e f o r e need to consider whether any r e s u m p t i o n of h o s t i l i t i e s m a y b e h e l d t o b e p r i m a r i l y the r e s u l t of C o m m u n i s t a g g r e s s i o n o r w h e t h e r i t a r i s e s f r o m t h e r e f u s a l of G e n e r a l P h o u m i to a g r e e to a r e a s o n a b l e s e t t l e m e n t . Apart from a n y d i f f i c u l t i e s we m i g h t h a v e t o f a c e in t h e U n i t e d N a t i o n s , t h e r e w o u l d . b e t h e p r a c t i c a l difficulty of o u r r e l a t i o n s w i t h M a l a y a a n d o u r s e c u r i t y t r e a t y with the M a l a y a n G o v e r n m e n t . We m u s t t h e r e f o r e m a k e i t p l a i n t h a t we c a n m a k e n o a d v a n c e c o m m i t m e n t s of a n y k i n d a s t o h o w we w o u l d a c t if h o s t i l i t i e s b e g i n a g a i n . 11. The a d v a n t a g e s of s u c h a m e s s a g e w o u l d be t h a t in r e a c h i n g difficult d e c i s i o n s in t h e n e a r f u t u r e t h e A m e r i c a n s o u g h t t o k n o w e x a c t l y w h a t i s o u r p r e s e n t p o s i t i o n - it would b e u n f a i r t o s p r i n g a c h a n g e of f r o n t on t h e m a t t h e l a s t m o m e n t . The disadvantage is t h a t it m a y u p s e t t h e m a n d d i m i n i s h o u r p o w e r t o i n f l u e n c e t h e i r decisions. Recommendations 12.
(i)
We s h o u l d follow t h e l i n e of p o l i c y l a i d down in
p a r a g r a p h s 5 and 6 above.
We s h o u l d d e c i d e w h e t h e r t o s e n d a m e s s a g e to t h e P r e s i d e n t in t h e l i g h t of d e v e l o p m e n t s at Geneva over the weekend.
H. F o r e i g n Office, S. W. 1. 19th J a n u a r y , 1962.
-4.
Printed for the Cabinet.
January
C . (62) 16 22nd January,
1962
Copy N o .
57
1962
CABINET
PUBLIC
EXPENDITURE
MEMORANDUM BY THE C H I E F SECRETARY TO THE TREASURY AND PAYMASTER GENERAL
It may be convenient to the Cabinet if I gather together in one short paper the main facts and issues which now face us on Public Expenditure. The 1961-62 Outturn 2. The Supplementary Estimates so far presented total £144 million. W e have shortly to present another batch of over £100 million. Allowing for some savings, the net outturn for 1961-62 now seems likely to be about £5,400 million, some £210 million above the Budget Estimates (£5,187 million). The 1962-63 Estimates 3. The 1962-63 Estimates, at £5,610 million, show a rise of £423 million on the Budget Estimates for 1961-62. This rise, amounting to over 8 per cent., will be very badly received at home and abroad. The 2\ per cent. Pledge 4. It is true that, of the rise of £423 million, £40 million is due to a technical book-keeping alteration necessitated by the new form of Estimates, and £139 million to increases in pay and prices. But that still leaves a gap of £244 million, which we need to reduce to £134 million to fulfil the 2\ per cent, pledge by the Chancellor of the Exchequer. If we cannot reduce that £244 million we shall have^o explain, when the Vote on Account is published at the end of February, why we are budgeting for an increase in real terms of 4£ per cent, and not 2\ per cent., as Parliament and the International Monetary F u n d authorities have been led to expect. 5. Towards the £110 million economies needed, the only proposals in view are for saving £20^ million on welfare milk and £17 million on school meals. If we do both these, we shall still be £72 million short of our target; we shall be budgeting for an increase in real terms of between 3f per cent, and 4 per cent. Necessity for Long-term Policy Decisions 6. Will not those who are watching our performance critically draw the conclusion that our efforts to control the growth of expenditure are ineffective? The only means available to rebut such criticism will be by showing unmistakably that, even though we have not managed to keep the 1962-63 Estimates down, nevertheless we have taken firm long-term policy decisions for restricting the 60304
future growth of expenditure. T h e present position in each principal field is as follows: (a) Defence.—The Defence Committee have endorsed proposals for strategy in the 1960s which are stated to cost £1,810 million in 1965^-66 on the understanding that the Minister would endeavour to reduce this amount to £1,787 million (the figure laid down in the Prime Minister^ directive), by securing further economies in manpower, in the use of nuclear material for defence purposes and in research and development expenditure. (b) Roads.—A five-year plan has been agreed and announced, at levels a good way short of what the Minister of Transport would have liked. (c) Health.—The Minister of Health and the Secretary of State for Scotland have agreed to keep the annual rate of growth of current expenditure in the National Health Service within 2% per cent. (d) Education.—The Minister of Education desires a rate of growth of local authorities' current expenditure of 4'i per cent, per annum or more. I am sure that we cannot fit in so high a figure. T o obtain a material reduction we must slow down the rate of increase of educational investment on the lines I have suggested. (e) Housing.—The Minister of Housing wishes for a considerably larger increase in council house building from 1963 onwards than I think we are in a position to authorise. (/) Agriculture.—Until the present system of price support is altered we have a dangerous open-ended commitment. (g) Nationalised Industries.—The deficit of the railways is not yet under control. It is likely to be £150 million in the current year and more than that in 1962-63. The outlook for the National Coal Board is better but still very uncertain. 7. There is the opportunity now to take firm decisions on a number of the matters indicated above. If we do not do so, I am unable to see how we can restore confidence in the soundness of our economic policies sufficiently td get us through the next few months. We are not out of danger 8. This restoration of confidence, based upon a joint policy of restraint in incomes and firm decisions on Government expenditure, is essential as the starting point for a policy of long-term growth, which must surely be our aim. We have not yet extricated ourselves from the immediate dangers. We must not imperil our chances of doing so by committing ourselves here and now to generous decisions on long-term programmes which, at the moment, there is no evidence that we shall be able to carry through without fresh crises. H. B.
Treasury Chambers, S.W. 1,
22nd January, 1962.
Printed for the Cabinet.
C. (62) 17 23rd January,
January
1962
Copy No.
55
1962 CABINET
WHALING IN SOUTH
GEORGIA
MEMORANDUM BY THE MINISTER OF STATE FOR COLONIAL A F F A I R S
Two whaling stations have until now operated from the island of South Georgia in the Falkland Islands Dependencies. The smaller one, at Grytviken, is run by a company named Albion Star, with mainly Norwegian crews and registered in the Dependencies: the other, and much larger concern, at Leith Harbour, by Salvesen's, a Scottish firm. 2. Salvesen's have made losses in recent years and have decided not to operate this season. They have received a bid from a Japanese company to take over their installations at Leith Harbour which in its turn depends on the transfer of the lease of the land which needs the approval of the Governor of the Falklands. They want to accept this bid, which they imply is for " around a million pounds ". 3. If it is carried through it will mean that South Georgia will have as its resident population, apart from the Administrative Officer and his staff of one or two, one which is entirely, or likely to be entirely, Japanese since the smaller company would almost certainly have to change to Japanese crews to compete, or close down. 4. Objections have been raised by the Governor and others. The Governor for his part is fearful that, while initially the Japanese company would co-operate, in time they would have less and less regard for our administration which is run on a shoe-string and is dependent on good relations between the Administrative Officer and the Whaling Company and the provision of facilities by the latter for his administration to get about. He therefore is not keen that the deal should go through. The Foreign Office are not anxious to see the question of the Falkland Island Dependencies further complicated by having all or the majority of the population on South Georgia Japanese. T h e Ministry of Defence do not consider that defence arguments need prevail, and the Scottish Office and the Ministry of Agriculture, Fisheries and Food, see no reason to oppose it. 5. I see the force of the objections and I feel no enthusiasm for seeing South Georgia peopled entirely with Japanese. But at the same time it seems to me very difficult for the Government to veto what is essentially a commercial transaction. Should we do this, I would expect criticism in Parliament both from Scottish Members who support Salvesen's and from free traders and internationalists generally. There might also be complications in the General Agreement on Tariffs and Trade and representations from the Japanese Government. Moreover, we might well have to face a claim for heavy compensation from Salvesen's. 6. On balance I believe that, providing the Japanese company are prepared to meet our extra administrative costs (i.e., a launch and crew and possibly a Government sub-station) we should not stop the deal. P. Colonial Office, S.W. 1,
23rd January, 1962.
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24th J a n u a r y , 1962 CABINET
U N I T E D NATIONS BOND ISSUE M e m o r a n d u m by the S e c r e t a r y of S t a t e f o r F o r e i g n Affairs On 2 3 r d J a n u a r y t h e C a b i n e t i n v i t e d m e t o c i r c u l a t e a f u r t h e r p a p e r s e t t i n g out t h e c o n d i t i o n s w h i c h m i g h t be a t t a c h e d t o a n a g r e e m e n t b y H e r M a j e s t y ' s G o v e r n m e n t to s u b s c r i b e t w e l v e m i l l i o n d o l l a r s to t h e U n i t e d N a t i o n s Bond i s s u e ( C . C . ( 6 2 ) 7th C o n c l u s i o n s , M i n u t e 4 ) . 2. I do n o t t h i n k it would b e p r a c t i c a b l e to m a k e o u r p a r t i c i p a t i o n c o n t i n g e n t upon t h e i m p o s i t i o n of p e n a l t i e s on d e f a u l t i n g m e m b e r s , s i n c e t h i s would r e q u i r e a m e n d m e n t of the U n i t e d N a t i o n s C h a r t e r ; n o r w o u l d it be a p p r o p r i a t e t o m a k e it c o n d i t i o n a l on a s a t i s f a c t o r y d e g r e e of s u p p o r t being f o r t h c o m i n g f r o m t h e U n i t e d S t a t e s G o v e r n m e n t on C o l o n i a l q u e s t i o n s , s i n c e one of t h e a r g u m e n t s for o u r s u b s c r i b i n g to t h e B o n d i s s u e i s t h a t o u r f a i l u r e to do s o w o u l d b e d a m a g i n g to A n g l o - A m e r i c a n r e l a t i o n s . The only c o n d i t i o n s we c a n p r o p e r l y a t t a c h to o u r u n d e r t a k i n g to s b u s c r i b e to t h e Bond i s s u e a r e f i n a n c i a l o n e s r e l a t e d t o the United N a t i o n s ' n e e d f o r c a s h a n d the e x t e n t to w h i c h o t h e r m e m b e r s fulfil t h e i r f i n a n c i a l o b l i g a t i o n s t o i t . 3.
T h e f o r m of w o r d s t h a t I r e c o m m e n d i s a s f o l l o w s :
" A s it i s t h e p o l i c y of H e r M a j e s t y ' s G o v e r n m e n t to s u p p o r t the United N a t i o n s O r g a n i s a t i o n a n d t o do w h a t t h e y c a n t o e n s u r e i t s efficiency and s o l v e n c y , t h e y i n t e n d t o r e s p o n d to t h e S e c r e t a r y - G s n e r a F s a p p e a l for s u b s c r i p t i o n s to t h e U n i t e d N a t i o n s B o n d i s s u e b y b u y i n g b o n d s up to a t o t a l v a l u e of t w e l v e m i l l i o n d o l l a r s . T h e s e w i l l b e t a k e n up b e f o r e the end of 1963. In m a k i n g o u r c o n t r i b u t i o n we s h a l l t a k e i n t o a c c o u n t t h e c a s h r e q u i r e m e n t s of t h e O r g a n i s a t i o n and t h e e x t e n t to w h i c h o t h e r c o u n t r i e s c o n t r i b u t e . We r e g a r d t h e i s s u e of b o n d s a s a o n c e - f o r - a l l m e a s u r e d e s i g n e d t o give the U n i t e d N a t i o n s an o p p o r t u n i t y t o p u t i t s f i n a n c e s i n o r d e r ; a n d we look to t h e O r g a n i s a t i o n to t a k e t h e o p p o r t u n i t y w h i c h t h e Bond i s s u e offers of p u t t i n g i t s f i n a n c e s in o r d e r . " 4. I s u g g e s t t h a t a s t a t e m e n t in t h i s f o r m s h o u l d b e m a d e t o P a r l i a m e n t a s s o o n a s p o s s i b l e . I a l s o s u g g e s t , in v i e w of a r e p o r t r e c e i v e d in New Y o r k t h a t P r e s i d e n t K e n n e d y m a y b e a b o u t to a d d r e s s a p e r s o n a l m e s s a g e t o the P r i m e M i n i s t e r on t h e s u b j e c t of t h e Bond i s s u e , t h a t H. M. A m b a s s a d o r in "Washington b e i n s t r u c t e d to i n f o r m t h e U n i t e d S t a t e s G o v e r n m e n t in c o n f i d e n c e m e a n w h i l e . H.
F o r e i g n Office, S. W. 1. 24th . J a n u a r y , 1962
Printed for the Cabinet.
C. (62) 19 29th January,
January
1962
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Copy N o .
g g
1962 CABINET KRUPP
DECONCENTRATION
MEMORANDUM BY THE SECRETARY OF STATE FOR FOREIGN AFFAIRS
The Bonn Settlement Convention (which entered into force in May 1955) obliged the Federal German Government to ensure the completion of measures initiated by the Occupying Powers for the deconcentration of the German coal-mining and iron and steel industries. The Krupp deconcentration is the only uncompleted one; and it has become clear that the prospect of a sale of the shares concerned is virtually nil. In the circumstances, there seems to be no alternative but for the ex-occupying Powers to agree to relieve the Federal German Government of their obligation under the Bonn Convention. I recognise that such a step will be very unwelcome to the public and to Parliament and I am therefore seeking the approval of my colleagues before informing the United States and French Governments of Her Majesty's Governments attitude to this problem. 2. A summary of the history and main features of the K r u p p Deconcentration Plan, promulgated in March 1953, is contained in the Government statements of 15th October, 1952, and 4th March, 1953, reproduced in the Annex to this paper. In accordance with the Plan, assets to the value of about £12 million at the times of disposal have been sold or ceded by Herr Krupp. The shares remaining to be sold are those of the Rheinhausen company, an integrated coal and steel enterprise whose present-day sale value would be well over £100 million. (These coal and steel interests in 1960 accounted for less than half of the total turnover of all the Krupp enterprises.) 3. The prospects of carrying through this enforced sale of the Krupp coal and steel interests became doubtful at a quite early stage. At the Paris Four-Power Conference in October 1954, at which the Bonn Conventions took their final form, Dr. Adenauer made a reservation (not published at the time) in which he anticipated that difficulties would arise in carrying out the Federal Governments deconcentration obligations, and reserved the right in that event to reopen the matter. Also, when the Federal Parliament examined the deconcentration provisions of the Settlement Convention, it made clear that it would be beyond the constitutional powers of their Government to enforce a sale of shares upon an unwilling owner. As early as February 1957 Dr. Adenauer wrote to ask the Three Powers not to continue with an arrangement which involved great political difficulty for the Federal German Government. By the end of 1958, after a long delay because of French reluctance, the Three Powers had come to the point of agreeing to waive further fulfilment of the Federal Governments obligation; but it was decided at the last moment, because of the political inopportuneness of the decision for Her Majesty's Government, to postpone a final decision and to gain time by setting up the Mixed Committee of independent experts provided for in the Convention. According to the terms of the Convention the Committee (consisting of three Allied and three German members with a neutral Swiss Chairman) have the power, if they are satisfied that no reasonable offers have been made, to extend the original time-limits for the sale of shares. Since 1959 they have granted successive annual extensions of time for the sale of the Krupp shares, the latest annual extension running to 31st January, 1962. The Committee met on 10th January to consider Herr Krupp's request for a further annual extension. They decided, since they considered that Herr K r u p p had not given adequate reasons for his request, only to grant an extension till 31st July. But they will meet again in June and will then doubtless agree that the time-limit should be extended to 31st January, 1963. 60325
A
4. In 1960, the Committee reported to t h e four Governments on.their work up to that time. This report was made at our own instance, with a view to its eventual usefulness in supporting a decision that the Krupp deconcentration could not be carried through; but the report has not yet been published, and though it contains some useful material, it might raise more questions.than it would answer. It was not.within the terms of reference of the Committee to make any recommendations .$v]poliey; but in their report it observed, justly enough, that there was no final solution in sight to the Krupp problem, that the method of granting successive extensions of time offered no prospect of reaching a final, solution, and that renewed consultation and agreement between the Governments concerned appeared necessary. After the Committee's report we began, as we promised the Federal German Foreign Minister eighteen months ago, to consider again a final decision to release the Federal Government from their obligation. 5. I believe that it would be increasingly difficult, as well as undesirable, to continue, with the aid of the Mixed Committee (which is already a transparent device for postponement of the issue), to keep alive, and pay lip-service to, an obligation on the Federal Government which they have neither the will nor the power to carry out. Equally, it would be an undesirable precedent simply to let this obligation become a dead letter. The only way out seems to be a formal exchange of notes with the Federal Government releasing them, in proper legal form, from their obligation under the Convention. It is expected that the United States Government will be ready to join in this at any time. The French Government (and particularly the French Prime Minister, M. Debre) have been reluctant to do this until they were satisfied on the score of future reconcentration in the German steel industry; but they seem now to think that recent decisions of the High Authority of the European Coal and Steel Community have given them enough reassurance to cope with their Parliamentary critics (who are not so much concerned as ours with Krupps in itself). In these circumstances, given the attitude of the other Governments concerned, I think the decision will have to be faced in the course of 1962. I have considered whether we could not extract some quid pro quo for this decision from the Federal Government, but I have not been able to find any German concession to which our own concession (which amounts to no more than recognising the inevitable) could be tied. 6. The decision is indeed an unpalatable one, and the Government could not pretend otherwise or try to whitewash Herr Krupp. Nevertheless, in so far as reason can avail against prejudice, there are the following arguments that could be used to defend the decision: (a) Her Majesty's Government have not the powers themselves to enforce this deconcentration; and they have to take account of the position of the other Governments concerned. (b) It can be repeated that the K r u p p Deconcentration Plan itself had to be negotiated within the framework of decisions taken by the Labour Government, particularly on Herr Krupp's trial as a war criminal (which was left to the United States authorities) and on providing that persons compelled to dispose of coal and steel interests under the deconcentration programme should receive the proceeds of sale. (c) It has become clear enough (as attested by the Mixed Committee) that, if only because of the very great and growing value of Rheiuhausen, there is no reasonable prospect of a sale of the shares. (d) We have maintained the obligation in force as long as we reasonably could. It is almost five years since the Federal Government first asked to be released from the obligation; instead of accepting their request in 1957, we had the Mixed Committee established in order to make sure whether Rheinhausen could not be sold. This is now clear. (e) In the circumstances of to-day, and taking account of the changes in the relationship between the Federal Government and the Three former Occupying Powers since 1954, the Three Powers could not expect to renegotiate the agreements on deconcentration in order to enforce a sale of the K r u p p coal and steel interests on terms less favourable to Herr K r u p p than those originally agreed. N o r could the Three Powers require the Federal Government to-day to carry through a sale of the shares by means not envisaged in the agreements (e.g., through nationalisation).
(/) Since the agreements on deconcentration were concluded'it has become clear that the High Authority of the European Coal and Steel Community (E.C.S.C.) is fully capable of exercising its powers in respect of concentrations. Recent decisions have shown this. It was always intended that future concentrations in the German coal and steel industries should be left to be governed by the E.C.S.C. Treaty, and the Bonn Conventions accordingly contained no provisions against reconcentration. In January 1959 the High Authority (without prejudice to the Allied deconcentration measures) gave approval for Herr Krupp's Rheinhausen concern to acquire a majority share-holding in another steel enterprise, but made this approval subject to special control, which Herr K r u p p accepted, of future steel investments by the Krupp group. This is the modern way in which the original intentions of the Allied deconcentration programme should be safeguarded. (g) The Krupp Deconcentration Plan has nothing to do with arms manufacture and imposes no restrictions in that respect. German manufacture of arms generally is controlled by the Brussels Treaty. Herr Krupp is not engaged in arms manufacture and has stated that he has no intention of manufacturing arms. (h) If Rheinhausen were sold, Herr K r u p p would be free to reinvest the proceeds anywhere outside the coal and steel industry (even in atomic energy); and even when one regards his competition with British exporters, it is probably just as well that his very large investment in coal and steel should remain where it is. 7. There are two main factors in the timing of a decision to waive fulfilment of the Federal Governments obligation: (a) We are committed to inform Parliament of any change of policy before any irrevocable step is taken to alter the deconcentration agreements. This means that we ought to announce our decision to Parliament after we had reached agreement with the United States and French Governments, and before we had entered into any negotiations with the Federal German Government. (b) There is a risk that our decision might be exploited by the opponents of our applications to join the Common Market. Because of this latter factor I am not making any definite proposal about the timing of our decision but I should welcome the views of my colleagues on this. On the other hand I am seeking approval now for the decision of principle, since without this we could not consult with our United States and French partners about the timing and other details, or begin to prepare the ground in Parliament for our decision (the news that the Mixed Committee have just granted a further extension of time will no doubt provoke questions). Recommendation 8. I invite my colleagues to agree that we must accept the unpopularity of the inevitable decision to waive fulfilment of the K r u p p Deconcentration Plan. I invite my colleagues to decide: (a) That Her Majesty's Government should be prepared to join with the United States and French Governments in waiving further fulfilment by the Federal German Government of their deconcentration obligation under the Bonn Settlement Convention. (b) That in the timing of this, care must be taken in particular to avoid political damage in Parliament to our approach to the Common Market and in general to choose the most favourable Parliamentary occasion. H. Foreign Office, 26th January,
60325
S.W.1, 1962.
ANNEX GOVERNMENT STATEMENTS 15th October, 1952 The Secretary of State for Foreign Affairs: With your permission, Mr. Speaker, and that of the House, I wish to make a statement on the case of Herr Alf ried Krupp. Alfried Krupp is the son of Gustav Krupp, who was arraigned as a major war criminal by the International War Crimes Tribunal at Nuremberg, but found unfit to plead. He succeeded his father as head of Krupps at the end of 1943. Alfried Krupp, together with a number of other industrialists in the British Zone, was handed over towards the end of 1946 by the authority of the late Government to the United States authorities for trial in the American Zonal War Crimes Court. H e was tried and convicted in 1948 of having employed slave labour and of having plundered occupied territories. He was sentenced to 12 years' imprisonment and to the confiscation of all his property. On the other hand, he was acquitted on charges of crimes against peace and conspiracy. In January 1951 the American High Commissioner reviewed the sentences imposed by this American court. He decided to reduce Krupp's prison sentence to the six years already served and to revoke the confiscation of his property. As the right honourable Gentleman, the Leader of the Opposition, said in his statement on 12th February, 1951, the review of Krupp's sentence was entirely a matter for the American High Commissioner, who was under no obligation to consult His Majesty's Government. In reviewing Krupp's sentence, the American High Commissioner found that this was the only case in which a war criminal had been sentenced to forfeiture of property (this was not done even in the case of Goering and Ribbentrop). He felt that confiscation in this instance was not justified by any special considerations attaching to Krupp. Under an Allied High Commission Law of May 1950, approved by His Late Majesty's Government, the French Government and the United States Government, the whole German coal and steel industry was to be reorganised so as to break u p excessive concentrations of economic power. Under that Law, the Krupp coal and steel complex is being broken up into independent units; and an Order is to be issued under which Krupp will be compelled to sell his securities in the coal and steel companies. N o provision was made under that Law by which Krupp's holdings in these companies could be confiscated either in whole or in part. On the contrary, in view of the decision to revoke the confiscation of Krupp's property, the effect of this Law was to provide him with compensation for all his holdings. N o reliable estimate can yet be formed of the amount which the sale of Krupp's securities will realise but it will run into many millions. Needless to say, this money will be drawn entirely from German sources. So much for the past. As to the future, we are seeking to ensure that Herr Krupp shall not be allowed to use the proceeds of the sale of his holdings to buy his way back into the coal and steel industries or otherwise to acquire a controlling interest. The means of achieving this end are under discussion in Germany between the High Commission and the Federal Government. 4th March, 1953 The Minister of State [Mr. Selwyn Lloyd): With your permission, Mr. Speaker, and that of the House, I wish to answer Question No. 104 on the arrangements now concluded with regard to the Krupp organisation. Since the statement made on 15th October by my right hon. Friend extensive discussions have been proceeding between the three Allied High Commissioners, the Federal Chancellor, Dr. Adenauer, and representatives of Herr Alfried Krupp. These have now resulted in an agreed plan.
The Krupp organisation has been broken up in the following manner. The former Krupp coal and steel interests, which were separated in 1947 from the rest of the Krupp organisation, are being transferred to three new companies, two for coal and one for steel. Herr Krupp's share holdings in these companies will be sold. He will thus be deprived of ownership and of any controlling interest. With regard to the proceeds of sale, which he will receive, an undertaking has been obtained from Herr Krupp in the following terms: He will not through the use of the proceeds of the aforementioned sale of securities acquire or own any securities of or any interest in any enterprise engaged directly or indirectly in the steel or iron producing industries in Germany or in the coal mining industry in Germany. He has also undertaken that: He will not, directly or indirectly, acquire or own a controlling interest in, or occupy a controlling position in any enterprise engaged directly or indirectly in the steel or iron producing industries in Germany or in the coal mining industry in Germany. This undertaking has been formally incorporated in the Krupp Deconcentration Plan, to which legal effect has been given by an order promulgated in Bonn to-day under Allied High Commission Law No. 27. The House may also like to know that, under the plan, the special privileged position particularly in the matter of death duties enjoyed by the Krupp family concern since 1943 is abrogated, and that Herr Krupp will be responsible for the payment of pensions to a large number of former Krupp employees. This commitment has been estimated at about £1 million a year. Under the provisions of the Bonn Conventions, signed last May, the Federal Government undertook to ensure that all deconcentration plans are carried through. The Federal Government will continue to give effect to Allied High Commission Law No. 27 until the whole deconcentration programme for the West German iron and steel industry has been completed. The remaining assets of the former firm of Friedrich Krupp, which include shipyards, engineering works, and miscellaneous trading concerns, are retained by Herr Krupp. The House will recall that, as my Right Hon. Friend made clear on 15th October, Her Majesty's Government have had to deal with this problem within the limits set by certain previous decisions. These were: (i) That the decisions taken in August 1946 about deconcentration had been limited to hiving off the coal, iron and steel interests only. (ii) Herr Krupp had been handed over for trial in the American Zone in November 1946. (iii) N o steps had been taken to confiscate Herr Krupp's property, in accordance with the sentence of forfeiture imposed by the American court in June 1948, during the time in which it would have been lawful for this to be done. (iv) Allied High Commission Law No. 27 of May 1950, which dealt with the deconcentration of the coal, iron and steel industries, not only contained no provisions for confiscation but in fact specifically provided for compensation for dispossessed owners. (v) After January 1951, when the sentence of forfeiture was rescinded, no power remained to confiscate any of Herr Krupp's property. Her Majesty's Government are satisfied that the present settlement provides in these circumstances the best possible solution of this difficult problem.
[IS DOCUMENT IS T H E P R O P E R T Y O F H E R BRITANNIC M A J E S T Y ' S G O V E R N M E N T ) ;
C. (62) 20
C O P Y NO.
31st J a n u a r y , 1962 CABINET INCOMES POLICY N o t e by the C h a n c e l l o r of the E x c h e q u e r
In t h e d e b a t e on 2 9 t h J a n u a r y , the L e a d e r of the H o u s e a n n o u n c e d t h a t we w o u l d l a y b e f o r e P a r l i a m e n t a White P a p e r e x p l a i n i n g the G o v e r n m e a f s p r o p o s a l s for t h e n e x t p h a s e in t h e i r i n c o m e s p o l i c y s t a r t i n g a f t e r 31st M a r c h . T h e M i n i s t e r of L a b o u r and I a r e a g r e e d t h a t the b a l a n c e of a d v a n t a g e l i e s in i s s u i n g a s h o r t White P a p e r a s s o o n a s we c a n a n d I a t t a c h a d r a f t w h i c h I h a v e a g r e e d with t h e M i n i s t e r a n d would p r o p o s e , if m y c o l l e a g u e s a g r e e , t o l a y b e f o r e P a r l i a m e n t on F r i d a y , 2nd F e b r u a r y .
S. L .
Treasury Chambers, S.W.1. 31st J a n u a r y , 1962.
P R A F T WHITE P A P E R
INCOMES^POLIGY:
THE INTERMEDIATE PHASE
hrtr^ductijgn 1. The G o v e r n m e n f s policy is to p r o m o t e e c o n o m i c growth and t h e v i t a l i t y of t h e B r i t i s h e c o n o m y . T h i s d e p e n d s on m a i n t a i n i n g t h e s t r e n g t h of t h e p o u n d a n d on o u r a b i l i t y t o k e e p p r i c e s s t a b l e and t o c o m p e t e e f f e c t i v e l y in m a r k e t s o v e r s e a s . In p u r s u i n g t h i s p o l i c y the G o v e r n m e n t a r e expecting to r e c e i v e valuable a s s i s t a n c e and advice from the National E c o n o m i c Development Council. But the p o l i c y w i l l be p u t in j e o p a r d y if m o n e y i n c o m e s r i s e f a s t e r t h a n t h e v o l u m e of n a t i o n a l p r o d u c t i o n , a s h a s b e e n t h e p e r s i s t e n t t e n d e n c y s i n c e the end of t h e w a r . 2. T h e G o v e r n m e n t t h e r e f o r e c o n s i d e r it e s s e n t i a l t h a t i n c r e a s e s in p e r s o n a l i n c o m e s of a l l k i n d s s h o u l d be b r o u g h t i n t o a m o r e r e a l i s t i c r e l a t i o n s h i p with i n c r e a s e s in n a t i o n a l p r o d u c t i o n . They r e g a r d t h e p a y p a u s e a s c o n s t i t u t i n g the f i r s t p h a s e i n t h e a c h i e v e m e n t of t h i s o b j e c t i v e . A s t h e M i n i s t e r of L a b o u r s a i d in t h e H o u s e of C o m m o n s on 29th J a n u a r y , t h e G o v e r n m e n t i n t e n d t o end t h a t p h a s e on 31st M a r c h n e x t . T h i s m e a n s t h a t a s f r o m 1st A p r i l , 1962: (a) effect w i l l b e g i v e n t o c e r t a i n w a g e a n d s a l a r y i n c r e a s e s in t h e C i v i l S e r v i c e a n d t h e N a t i o n a l Health Services which have been a g r e e d since J u l y , 1961, a n d w h i c h h a v e b e e n h e l d b a c k for i m p l e m e n t a t i o n on a d a t e t o b e d e c i d e d by t h e Government; (b) a t the n e x t r e v i e w in A p r i l w o r k e r s in G o v e r n m e n t w o r k e r s c o n c e r n e d will review indicates at that
of t h e " M " r a t e f o r e m p l o y m e n t , the be offered what the time;
(c)
effect w i l l b e g i v e n t o t h o s e p a r t s of a w a r d s of t h e C i v i l S e r v i c e A r b i t r a t i o n T r i b u n a l and the I n d u s t r i a l C o u r t which have been held in a b e y a n c e ;
(d)
t h e e f f e c t i v e d a t e of p a y i n c r e a s e s w i l l a g a i n be w i t h i n t h e s c o p e of n e g o t i a t i o n a n d a r b i t r a t i o n in t h e C i v i l S e r v i c e a n d N a t i o n a l H e a l t h S e r v i c e s , e x c e p t t h a t i n c r e a s e s w i l l not b e d a t e d e a r l i e r t h a n 1st A p r i l , 1962.
CONFIDENTIAL
3. In t h e d e b a t e in t h e H o u s e of C o m m o n s on 18th D e c e m b e r , 1961, t h e C h a n c e l l o r of the E x c h e q u e r s a i d t h a t it w a s t h e G o v e r n m e n t s i n t e n t i o n t o t r y t o w o r k out w i t h b o t h s i d e s of i n d u s t r y a p o l i c y t o k e e p i n c r e a s e s in m o n e y i n c o m e s i n l i n e w i t h t h e l o n g - t e r m r a t e of i n c r e a s e in n a t i o n a l p r o d u c t i o n . He s u g g e s t e d b r i e f l y w h a t t h e m a i n e l e m e n t s in such a policy m i g h t b e . He e x p l a i n e d , h o w e v e r , t h a t , g i v e n t h e c o m p l e x i t i e s of t h e p r o b l e m , a l o n g - t e r m i n c o m e s p o l i c y of t h i s s o r t would i n e v i t a b l y t a k e a c o n s i d e r a b l e t i m e t o w o r k out. The G o v e r n m e n t h o p e d , h o w e v e r , to m a k e s t e a d y p r o g r e s s t o w a r d s t h a t end. 4. In t h e s a m e s p e e c h t h e C h a n c e l l o r e m p h a s i s e d t h a t it would b e a n e g a t i o n of p o l i c y t o b r i n g t h e f i r s t p h a s e , t h e p a y p a u s e , to a n end a n d to p u t n o t h i n g i n i t s p l a c e . A c c o r d i n g l y , on 10th J a n u a r y , h e i n v i t e d t h e T r a d e s Union C o n g r e s s t o c o l l a b o r a t e with t h e G o v e r n m e n t a n d w i t h r e p r e s e n t a t i v e s of t h e e m p l o y e r s ' o r g a n i s a tions in working out suitable a r r a n g e m e n t s for maintaining the n e c e s s a r y r e s t r a i n i n g i n f l u e n c e on t h e g r o w t h of i n c o m e s d u r i n g t h e i n t e r m e d i a t e p h a s e p e n d i n g t h e e v o l u t i o n of a l o n g - t e r m i n c o m e s policy. T h e T . U. C. , w h i l e r e c o g n i s i n g in t h e i r r e p l y t h a t it w a s a c o n d i t i o n of r e a s o n a b l e p r i c e s t a b i l i t y t h a t i n c r e a s e s in i n c o m e s s h o u l d k e e p in s t e p with t h e g r o w t h of p r o d u c t i o n , felt u n a b l e t o accept this invitation. In t h e s e c i r c u m s t a n c e s t h e G o v e r n m e n t a r e n o w i s s u i n g t h i s s t a t e m e n t of t h e p r i n c i p l e s w h i c h , in t h e i r v i e w , s h o u l d g o v e r n d e c i s i o n s , d u r i n g t h e i n t e r m e d i a t e p h a s e , about t h e s c a l e of i n c r e a s e s in i n c o m e s . 5. The o b j e c t i v e m u s t be t o k e e p t h e r a t e of i n c r e a s e of i n c o m e s w i t h i n t h e l o n g - t e r m r a t e of g r o w t h of n a t i o n a l p r o d u c t i o n . The G o v e r n m e n t a i m t o s e c u r e a s o u n d l y - b a s e d i n c r e a s e in t h e r a t e of g r o w t h , so t h a t r e a l i n c o m e s w i l l r i s e m o r e r a p i d l y t h a n h i t h e r t o . F o r t h e m o m e n t , h o w e v e r , we m u s t d e a l w i t h t h i n g s a s t h e y a r e . In r e c e n t y e a r s n a t i o n a l p r o d u c t i o n p e r h e a d h a s r i s e n by a b o u t 2 t o 2j? p e r c e n t a y e a r a n d i t s e e m s l i k e l y t o i n c r e a s e a t about t h i s r a t e in 1962. It i s a c c o r d i n g l y n e c e s s a r y t h a t t h e i n c r e a s e of w a g e s a n d s a l a r i e s , a s of o t h e r i n c o m e s , s h o u l d b e k e p t within t h i s f i g u r e d u r i n g the i n t e r m e d i a t e p h a s e . It f o l l o w s t h a t in t h e G o v e r n m e n t s v i e w t h e r e i s n o s c o p e in 1962 f o r m o r e t h a n s t r i c t l y l i m i t e d i n c r e a s e s in wages and s a l a r i e s . In m a n y c a s e s t h e r e m a y i n d e e d b e no j u s t i f i c a t i o n a t p r e s e n t f o r a n y i n c r e a s e s at a l l . In o t h e r s t h e r e m a y be p a r t i c u l a r c i r c u m s t a n c e s which point the other way. 6. In c o n s i d e r i n g i n c r e a s e s in v/ages a n d s a l a r i e s w h a t m a t t e r s f o r c o s t s and p r i c e s is not s i m p l y t h e c h a n g e i n r a t e s but the a m o u n t actually paid. It w i l l t h e r e f o r e b e n e c e s s a r y t o h a v e r e g a r d t o t h e l i k e l i h o o d , j u d g e d f r o m p a s t e x p e r i e n c e , t h a t b a s i c r a t e s will in p r a c t i c e b e s u p p l e m e n t e d in c e r t a i n e m p l o y m e n t s b y l o c a l o r s p e c i a l payments. C h a n g e s in p a y m a d e u n d e r p a r t i c u l a r a g r e e m e n t s ( e . g, , r e l a t e d to t h e c o s t of l i v i n g ) a n d r e d u c t i o n s in h o u r s o r s i m i l a r i m p r o v e m e n t s w i l l a l s o h a v e to b e i n c l u d e d in the reckoning.
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C r i t e r i a b e a r i n g on w a g e a n d s a l a r y p r o p o s a l s 7. It i s n o t p o s s i b l e t o l a y down h a r d a n d f a s t r u l e s a s to the c r i t e r i a by w h i c h a n y g i v e n p r o p o s a l for a w a g e o r s a l a r y i n c r e a s e should be j u d g e d in t h e p e r i o d i m m e d i a t e l y a h e a d . But s o m e a r g u m e n t s w h i c h h a v e in t h e p a s t b e e n w i d e l y u s e d to j u s t i f y h i g h e r w a g e s and s a l a r i e s c e r t a i n l y ought n o t to be g i v e n t h e s a m e w e i g h t as hitherto. F o r example, a r g u m e n t s derived from the i n c r e a s e d c o s t of l i v i n g , o r f r o m t h e t r e n d s of p r o f i t s o r p r o d u c t i v i t y in a p a r t i c u l a r i n d u s t r y , c a n n o t in p r e s e n t c i r c u m s t a n c e s b e r e g a r d e d a s p r o v i d i n g of t h e m s e l v e s a s o u n d b a s i s for an i n c r e a s e . There m a y , h o w e v e r , be c a s e s in w h i c h a n i n c r e a s e c o u l d be j u s t i f i e d a s p a r t of an a g r e e m e n t u n d e r w h i c h the w o r k e r s c o n c e r n e d m a d e a d i r e c t c o n t r i b u t i o n ; by a c c e p t i n g h a r d e r w o r k , m o r e o n e r o u s c o n d i t i o n s , o r b y a s a c r i f i c e of t r a d i t i o n a l p r a c t i c e s , t o a n i n c r e a s e of p r o d u c t i v i t y a n d a r e d u c t i o n of c o s t s . 8. S h o r t a g e s of l a b o u r . A s h o r t a g e of l a b o u r w i t h i n a p a r t i c u l a r i n d u s t r y o r f i r m d o e s n o t of i t s e l f w a r r a n t an i n c r e a s e , s i n c e in a fully e m p l o y e d e c o n o m y t h e r e a r e bound to b e s c a r c i t i e s of m a n y k i n d s of l a b o u r . It i s only w h e r e t h e b u i l d i n g up of m a n p o w e r in one i n d u s t r y r e l a t i v e l y t o o t h e r s , o r t h e p r e v e n t i o n of a t h r e a t e n e d d e c l i n e , i s p l a i n l y n e c e s s a r y t h a t an i n c r e a s e on t h o s e g r o u n d s could b e j u s t i f i e d . S u c h a n e e d m a y be e i t h e r g e n e r a l o r r e l a t e d to p a r t i c u l a r a r e a s o r g r a d e s . 9Comparability. In t h e p a s t c o m p a r i s o n s w i t h l e v e l s o r t r e n d s of i n c o m e in o t h e r e m p l o y m e n t s h a v e p l a y e d a l a r g e p a r t in d i s c u s s i o n s leading to wage and s a l a r y i n c r e a s e s and have been a c c e p t e d a s g u i d i n g c r i t e r i a , e s p e c i a l l y in t h e p u b l i c s e r v i c e s . These c o m p a r i s o n s will still have a p a r t to play. But a t a n y r a t e in the i m m e d i a t e future m o r e r e g a r d will have to be given to the g e n e r a l e c o n o m i c c o n s i d e r a t i o n s s e t out in t h i s p a p e r . The G o v e r n m e n t w i l l e m p h a s i z e t h e n e e d f o r t h i s in t h e i r n e g o t i a t i o n s with t h e i r own e m p l o y e e s . 10. Lowest-paid workers. T h e r e m a y be s o m e c a s e s w h e r e an i n c r e a s e could b e j u s t i f i e d f o r g r o u p s of w o r k e r s w h o s e r a t e s of wages have been exceptionally low. But t h i s s h o u l d not b e a l l o w e d to lead to other i n c r e a s e s designed m e r e l y to r e s t o r e f o r m e r relativities. T h i s would n o t only h a r m the e c o n o m y a s a w h o l e bxxt by l e a d i n g to h i g h e r p r i c e s w o u l d d e p r i v e t h o s e w h o m it w a s i n t e n d e d to b e n e f i t of m u c h of t h e r e a l v a l u e of t h e i n c r e a s e . Negotiation and arbitratijon 11. It i s for e m p l o y e r s a n d e m p l o y e e s to w o r k out t h e a p p l i c a t i o n of t h e c o n s i d e r a t i o n s s e t out a b o v e t o i n d i v i d u a l c a s e s , in t h e l i g h t of t h e c o n d i t i o n s a n d a g r e e m e n t s e x i s t i n g in p a r t i c u l a r industries and a r e a s . The G o v e r n m e n t ask, however, that all n e g o t i a t i o n s affecting w a g e s a n d s a l a r i e s in 1962 s h o u l d r e f l e c t these considerations. T h e e f f e c t i v e n e s s of t h i s a p p r o a c h n e c e s s a r i l y d e p e n d s h e a v i l y on t h e w i l l i n g n e s s of w o r k e r s n o t t o -3CONFIDENT6AL
p r e s s c l a i m s w h i c h go b e y o n d t h e l i m i t s w h i c h t h i s p o l i c y i n d i c a t e s . S i n c e w a g e s and s a l a r i e s a r e a l a r g e p r o p o r t i o n of t o t a l i n c o m e s a n d s i n c e i n c r e a s e s in p a y do n o t , i n g e n e r a l , c o m e out of p r o f i t i n c o m e s , a s u b s t a n t i a l p a y i n c r e a s e o b t a i n e d b y one s e t of w o r k e r s i s u l t i m a t e l y p a i d f o r in t h e m a i n b y t h e i r f e l l o w w o r k e r s . This c o n s i d e r a t i o n s h o u l d h a v e a r e s t r a i n i n g effect on t h o s e who a r e in a strong bargaining position. T h e e f f e c t i v e n e s s of t h e p r o p o s a l s d e p e n d s a l s o upon t h e c o - o p e r a t i o n of e m p l o y e r s and upon t h e i r a b i l i t y t o e n s u r e t h a t m o d e r a t i o n in c o l l e c t i v e l y - n e g o t i a t e d s e t t l e m e n t s i s not fr u s t r a t e d in i t s e f f e c t s by i n d i v i d u a l b i d d i n g - u p of w a g e and s a l a r y r a t e s . A special responsibility attaches to t h o s e i n d u s t r i e s in w h i c h s e t t l e m e n t s of w a g e s a n d s a l a r i e s m a y set a general pattern. T h i s a p p l i e s to n a t i o n a l i s e d i n d u s t r i e s a s w e l l a s t o i n d u s t r i e s in t h e p r i v a t e s e c t o r . The G o v e r n m e n t have a l r e a d y m a d e c l e a r t h a t in r e s p e c t of t h e C i v i l S e r v i c e t h e i r r e p r e s e n t a t i v e s in n e g o t i a t i o n a n d a t a r b i t r a t i o n w i l l a r g u e t h e n e e d , in t h e n a t i o n a l i n t e r e s t , t o k e e p i n c r e a s e s in i n c o m e s in p r o p e r r e l a t i o n s h i p t o i n c r e a s e s in n a t i o n a l p r o d u c t i o n . 12. In a w i d e r a n g e of e m p l o y m e n t s a r r a n g e m e n t s e x i s t w h e r e b y differences which a r e not s e t t l e d by negotiation can be r e f e r r e d by a g r e e m e n t t o i n d e p e n d e n t a r b i t r a t i o n . Indeed, the p o s s i b i l i t y of a r b i t r a t i o n i s e x p r e s s l y p r o v i d e d f o r in n a t i o n a l a g r e e m e n t s covering about six m i l l i o n e m p l o y e e s . When t h e r e i s no s p e c i f i c p r o v i s i o n on t h e s u b j e c t a r b i t r a t i o n i s u s e d f r o m t i m e t o t i m e in o t h e r i n d u s t r i e s and s e r v i c e s w h e n t h e p a r t i e s a g r e e t h a t i t i s appropriate. T h i s p e a c e f u l m e a n s of s e t t l i n g d i s p u t e s h a s b e e n of u n d o u b t e d v a l u e in a v o i d i n g i n d u s t r i a l s t r i f e a n d t h e G o v e r n m e n t a t t a c h g r e a t i m p o r t a n c e t o t h e m a i n t e n a n c e of a r r a n g e m e n t s w h e r e b y d i s p u t e s a r e r e f e r r e d by a g r e e m e n t t o a r b i t r a t i o n . They r e c o g n i s e t h a t a r b i t r a t i o n w i l l only o p e r a t e e f f e c t i v e l y if a r b i t r a t o r s c o n t i n u e to e x e r c i s e , a n d a r e s e e n t o e x e r c i s e , c o m p l e t e i n d e p e n d e n c e in m a k i n g t h e i r own a w a r d s . 13. A r b i t r a t o r s have at t i m e s b e e n c r i t i z e d for dealing only with the p a r t i c u l a r c a s e b e f o r e t h e m a s a p r i v a t e i s s u e b e t w e e n t h e two p a r t i e s c o n c e r n e d . B u t in t h e c o m p l e x e c o n o m i c s i t u a t i o n of t h e p o s t - w a r y e a r s a r b i t r a t o r s g e n e r a l l y h a v e b e c o m e i n c r e a s i n g l y c o n s c i o u s of, a n d i n t e r e s t e d i n , t h e w i d e r i m p l i c a t i o n s of t h e i r awards. T h i s , in t h e G o v e r n m e n t s v i e w , i s of c r u c i a l i m p o r t a n c e . A r b i t r a t o r s ought t h e r e f o r e t o b e g i v e n a n o p p o r t u n i t y t o c o n s i d e r all the information n e c e s s a r y to put the p a r t i c u l a r case before t h e m in i t s p r o p e r p e r s p e c t i v e a g a i n s t t h e b a c k g r o u n d of w a g e m o v e m e n t s e l s e w h e r e a n d o t h e r f a c t o r s affecting t h e n a t i o n a l e c o n o m i c situation. They m u s t a l s o have an opportunity to h e a r the views of t h e p a r t i e s on t h e a p p l i c a t i o n t o t h e i r c a s e b o t h of t h i s i n f o r m a t i o n a n d of t h e g e n e r a l p r i n c i p l e t h a t i n c o m e s s h o u l d not i n c r e a s e faster than national productivity. 14. T h e G o v e r n m e n t p r o p o s e t o c o l l e c t t o g e t h e r and t o p u b l i s h in c o n v e n i e n t f o r m f a c t u a l i n f o r m a t i o n on w a g e r a t e s , e a r n i n g s , h o u r s of w o r k a n d o t h e r c o n d i t i o n s of e m p l o y m e n t , m a n - p o w e r , p r i c e s , p r o d u c t i o n , p r o f i t s a n d o t h e r r e l e v a n t s u b j e c t s s o t h a t due -4. CONFIDENTIAL
w e i g h t c a n be g i v e n b y a l l c o n c e r n e d to t h e c o n s i d e r a t i o n s s e t out in t h i s p a p e r a t a l l s t a g e s of n e g o t i a t i o n a n d a t a r b i t r a t i o n . Publication will take place at r e g u l a r i n t e r v a l s to e n s u r e that u p t o - d a t e i n f o r m a t i o n w i l l be a v a i l a b l e a t a l l t i m e s . Profits
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15. A l t h o u g h t h i s p a p e r d e a l s p r i m a r i l y with w a g e s a n d s a l a r i e s , t h e s a m e p r i n c i p l e s a p p l y , in t h e G o v e r n m e n t s v i e w , t o a l l f o r m s of i n c o m e . C o n t i n u e d r e s t r a i n t in p r o f i t s a n d d i v i d e n d s i s a n e c e s s a r y c o r o l l a r y of t h e i n c o m e s p o l i c y o u t l i n e d a b o v e and t h e G o v e r n m e n t r e - a f f i r m t h e r e q u e s t for the c o - o p e r a t i o n of t h o s e r e s p o n s i b l e m a d e by t h e C h a n c e l l o r in t h e s t a t e m e n t on 25th J u l y , 1961. In t h e d e b a t e in t h e H o u s e of C o m m o n s on 18th D e c e m b e r , 1961, t h e C h a n c e l l o r s a i d t h a t " a s a p a r t of t h e i n c o m e s p o l i c y , a p p r o p r i a t e c o r r e c t i v e a c t i o n w o u l d h a v e t o b e t a k e n if a g g r e g a t e p r o f i t s s h o w e d s i g n s of i n c r e a s i n g e x c e s s i v e l y a s c o m p a r e d w i t h w a g e s and s a l a r i e s " . Conclusion 16. T h e G o v e r n m e n t r e - a f f i r m t h a t t h e i r p o l i c y i s one of securing economic expansion and growth. But t h i s c a n only b e a c h i e v e d if we c a n i n t r o d u c e a g r e a t e r e l e m e n t of r e a l i s m into o u r t r e a t m e n t of i n c o m e s . This m o r e than anything e l s e is the key t o s e c u r i n g a s t e a d y i m p r o v e m e n t i n o u r r e a l s t a n d a r d of l i f e .
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kHlS DOCUMENT IS T H E P R O P E R T Y O F H E R B R I T A N N I C M A J S S T Y ' S G O V E R N M E N T )
C. (62) 21
C O P Y NO.
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3 r d F e b r u a r y , 1962 CABINET
S H O R T - T E R M E C O N O M I E S IN T H E C O S T O F AGRICULTURAL S U P P O R T AND T H E ANNUAL "FARM PRICE" R E V I E W M e m o r a n d u m by t h e Chief S e c r e t a r y t o t h e T r e a s u r y
The F a r m P r i c e Review C o m m i t t e e have c o n s i d e r e d r e p o r t s by o f f i c i a l s , p r e p a r e d i n a c c o r d a n c e w i t h t h e c o n c l u s i o n of t h e C a b i n e t on 12th D e c e m b e r , 1961 ( C . C. (6l) 71st C o n c l u s i o n s , M i n u t e 6, C o n c l u s i o n (3)), on t h e p o s s i b i l i t y of s e c u r i n g f u r t h e r e c o n o m i e s in t h e c o s t of a g r i c u l t u r a l s u p p o r t in t h e s h o r t t e r m . 2. O f f i c i a l s c o n c l u d e d t h a t t h e only m e a s u r e s w o r t h i m m e d i a t e consideration were: (i) t h e a p p l i c a t i o n of t h e p r i n c i p l e of " s t a n d a r d q u a n t i t i e s " , i, e . , l i m i t i n g t h e q u a n t i t y of p r o d u c e on w h i c h g u a r a n t e e d p r i c e s w o u l d b e p a i d in r e s p e c t of c e r t a i n c o m m o d i t i e s f o r which t h e r e a r e no such l i m i t s at p r e s e n t ; and (ii) a b o l i s h i n g t h e E x c h e q u e r s u b s i d y on m i l k , w h i c h at p r e s e n t amounts to about £8 million p e r annum. The C o m m i t t e e a g r e e d with t h i s conclusion. They felt however that, w h i l e t h e a p p l i c a t i o n of " s t a n d a r d q u a n t i t i e s " to f u r t h e r c o m m o d i t i e s m i g h t w e l l b e a u s e f u l i n s t r u m e n t in f u t u r e , t h e r e w e r e p o w e r f u l a r g u m e n t s against making this m a j o r policy change at the p r e s e n t moment. I concurred. 3. T h e g e n e r a l E x c h e q u e r s u b s i d y on m i l k ( w h i c h i s q u i t e d i s t i n c t f r o m t h e s u b s i d y on w e l f a r e m i l k ) a r i s e s b e c a u s e t h e " s t a n d a r d q u a n t i t y " , on w h i c h t h e p r i c e is g u a r a n t e e d t o p r o d u c e r s , e x c e e d s by s o m e 100 m i l l i o n g a l l o n s t h e t o t a l a m o u n t of the l i q u i d c o n s u m p t i o n (plus a 20 p e r c e n t r e s e r v e ) , t h e c o s t of w h i c h i s r e c o v e r e d f r o m c o n s u m e r s of l i q u i d m i l k . T h e E x c h e q u e r b e a r s t h e l o s s on t h i s d i f f e r e n c e of 100 m i l l i o n g a l l o n s , w h i c h h a s b e e n s o l d f o r manufacturing.
4. Officials c o n c l u d e d t h a t i t w o u l d b e p o s s i b l e t o a b o l i s h the s u b s i d y e i t h e r a t t h e e x p e n s e of t h e p r o d u c e r , b y r e d u c i n g by 100 m i l l i o n g a l l o n s the a m o u n t of t h e " s t a n d a r d q u a n t i t y " on w h i c h t h e g u a r a n t e e d p r i c e i s p a i d , o r by r a i s i n g t h e p r i c e of l i q u i d m i l k t o c o n s u m e r s by jrd. a p i n t f o r four m o n t h s in t h e y e a r a b o v e w h a t i t would o t h e r w i s e h a v e been. The f i r s t c o u r s e w o u l d b e b i t t e r l y o p p o s e d b y t h e N a t i o n a l F a r m e r s ' U n i o n s a n d t h e M i l k M a r k e t i n g B o a r d s , a n d t h e l o s s to f a r m i n c o m e s would h a v e t o c o u n t a g a i n s t t h e m a x i m u m p e r m i s s i b l e r e d u c t i o n s in f a r m s u p p o r t in t h e A n n u a l P r i c e R e v i e w , a t i n d e e d m e r e t h a n t h e a m o u n t of t h e s a v i n g to t h e E x c h e q u e r . Officials r e c o m m e n d e d t h a t , if t h e s u b s i d y w e r e t o be r e m o v e d , t h e s e c o n d c o u r s e s h o u l d be a d o p t e d . 5. The C o m m i t t e e a l s o c o n s i d e r e d a r e p o r t by officials in p r e p a r a t i o n f o r t h e A n n u a l P r i c e R e v i e w w h i c h w i l l b e g i n on 7th F e b r u a r y . The C o m m i t t e e a g r e e d t h a t consultations with the National F a r m e r s ' U n i o n s s h o u l d be s t a r t e d on t h e b a s i s t h a t t h i s y e a r t h e r e m u s t be a "minimum determination". T h i s w o u l d i n v o l v e r e d u c i n g t h e v a l u e of t h e g u a r a n t e e s t o t h e f a r m e r s by a b o u t £14^ m i l l i o n . In d i s c u s s i n g w h e r e t h e s e reductions would fall t h e r e w a s , h o w e v e r , s o m e d i s a g r e e m e n t in t h e C o m m i t t e e on one p o i n t . 6. The A g r i c u l t u r a l M i n i s t e r s a t t a c h e d g r e a t i m p o r t a n c e to taking b a c k t h e i n c r e a s e of 0. 8 d . p e r g a l l o n of m i l k w h i c h t h e G o v e r n m e n t a g r e e d t o l a s t y e a r on t h e e x p r e s s u n d e r s t a n d i n g t h a t t h e U n i o n s w o u l d devise a s a t i s f a c t o r y a l t e r n a t i v e to the p r e s e n t support a r r a n g e m e n t s ; t h i s t h e y h a v e now b e e n u n a b l e to d o . T h e y a l s o p o i n t e d out t h a t m i l k p r o d u c t i o n h a d i n c r e a s e d b y 100 m i l l i o n g a l l o n s i n 1961 a n d w a s f o r e c a s t t o go up by a f u r t h e r 75 m i l l i o n in 1962. On p r o d u c t i o n g r o u n d s t h e r e w a s a s t r o n g c a s e f o r t a k i n g off t h e 0. 8d. 7. I p o i n t e d o u t , h o w e v e r , t h a t t h e r e d u c t i o n of 0. 8d. p e r g a l l o n w o u l d u s e up £61- m i l l i o n of t h e £14jr m i l l i o n in a w a y w h i c h w o u l d not p r o d u c e any s a v i n g f o r t h e E x c h e q u e r , b e c a u s e u n d e r p r e s e n t a r r a n g e m e n t s t h e b e n e f i t would a c c r u e n o t t o t h e E x c h e q u e r , b u t t o t h e c o n s u m e r in a l o w e r r e t a i l p r i c e . It w a s e s s e n t i a l in p r e s e n t c i r c u m s t a n c e s that the s a v i n g s to the E x c h e q u e r should amount to at l e a s t t h e full £14jr m i l l i o n . T h e r e f o r e , while appreciating the M i n i s t e r ' s d e s i r e t o t a k e b a c k l a s t y e a r ' s i n c r e a s e in t h e g u a r a n t e e d p r i c e of m i l k t o t h e p r o d u c e r , I f e l t a b l e t o a c c e p t i t only on t h e u n d e r s t a n d i n g t h a t a t t h e s a m e t i m e £ 8 m i l l i o n s h o u l d be s a v e d b y a b o l i s h i n g the Exchequer subsidy. T h e s e c h a n g e s t a k e n t o g e t h e r (i. e . , r e d u c i n g the g u a r a n t e e d p r i c e and e l i m i n a t i n g the subsidy) would leave the r e t a i l p r i c e t o t h e c o n s u m e r d u r i n g t h e c o m i n g y e a r n o h i g h e r t h a n it w o u l d h a v e b e e n if no c h a n g e s a t a l l w e r e m a d e t h i s y e a r . 8. T h e M i n i s t e r of A g r i c u l t u r e , h o w e v e r , s a i d t h a t at p r e s e n t t h e c o n s u m e r w a s c a l l e d upon t o p a y for t h e c o s t of t h e m i l k w h i c h h e c o n s u m e d , p l u s a r e s e r v e of 20 p e r c e n t , a n d h e c ould s e e n o c a s e f o r p u t t i n g on to t h e c o n s u m e r t h e a d d i t i o n a l c o s t of t h e p r e s e n t s u b s i d y , w h i c h r e p r e s e n t s a l o s s on m i l k s o l d for m a n u f a c t u r e . I p o i n t e d out t h a t , if h e took t h i s v i e w , t h e l o g i c a l c o u r s e w o u l d b e t o r e m o v e the s u b s i d y b y r e d u c i n g " s t a n d a r d q u a n t i t i e s " a t t h e c o s t of p r o d u c e r s ( s e e p a r a g r a p h 4 a b o v e ) , e v e n t h o u g h t h i s would be e x p e n s i v e a n d o t h e r w i s e undesirable. -2-
SECRET
9. A s C h a i r m a n of t h e F a r m P r i c e R e v i e w C o m m i t t e e , I a s k ray colleagues to d e c i d e : (i)
(ii)
w h e t h e r t h e r e d u c t i o n s in g u a r a n t e e d p r i c e s a t the Annual F a r m P r i c e Review should include the t a k i n g b a c k of t h e 0. 8d. i n c r e a s e p e r g a l l o n of m i l k a g r e e d on a y e a r a g o (in w h i c h c a s e t h e s a v i n g t o t h e E x c h e q u e r f r o m t h e R e v i e w could not e x c e e d £ 8 m i l l i o n a y e a r ) , o r w h e t h e r t h e y s h o u l d b e m a d e on c o m m o d i t i e s o t h e r t h a n m i l k (in w h i c h c a s e t h e s a v i n g t o t h e E x c h e q u e r w o u l d b e £14-j m i l l i o n a y e a r ) ; if t h e f o r m e r , w h e t h e r the E x c h e q u e r s u b s i d y on m i l k s h o u l d b e a b o l i s h e d , a t a f u r t h e r s a v i n g t o t h e E x c h e q u e r of £ 8 m i l l i o n a y e a r , m a k i n g £16 m i l l i o n a y e a r in a l l .
H. B .
Treasury Chambers, S.W.1. 2nd D e c e m b e r , 1962.
-3
Printed for the Cabinet.
C. (62) 22 6th February,
February
1962
Copy N o . 5 0 1962 CABINET
KENYA MEMORANDUM BY THE SECRETARY OF STATE FOR THE COLONIES
The Kenya Conference, which opens on 14th February, is designed to settle the future Constitution of Kenya. If we follow the normal precedent established elsewhere the conference, if successful, would be followed by a new General Election based on revised franchise arrangements, a period of full internal self-government starting either just before or just after the elections, and then further negotiation with Her Majesty's Government leading up to ultimate independence. 2. It is widely believed that the date we have in mind for independence is some time in the first half of 1963. 3. The people who most impressed me during my visit to Nairobi two months ago were the Provincial Commissioners. They gave me their unanimous advice: (i) That the rate of advance to independence, which they assumed would come in the spring of 1963, was too rapid. (ii) They could think of no way in which it could now be slowed down. Must we really accept this advice, or is there some way, either of taking some of the dangers out of independence, or of retarding the date, or of doing both? This is the question we shall have to settle in the course of the coming months. 4. The dangers themselves are not difficult to see. In political maturity the indigenous people of Kenya are far behind even the West Africans. The number of trained administrators, and the number of officers and senior non-commissioned officers available are very small. There are strong tribal antagonisms that can easily be fanned into violence by irresponsible leaders and they are based on fears, that have much substance, of Kikuyu domination. There is a large European population with a great and long-established stake in the country. Land-hungry Africans are casting jealous eyes on the European lands, but it is European agriculture that provides the foundation of Kenya's economy. Over everything broods the threat of Mau Mau, the influence of the ex-detainees in the Kenya African National Union (K.A.N.U.), and the persistence of personal violence. Small wonder in these circumstances that confidence is rapidly disappearing and that the economy of the country is running rapidly downhill. The European farmers and the European administrators, upon whom the country depends, have little incentive to stay. 5. These dangers can be avoided only if we can ensure an administration that is adequately efficient and incorrupt (standards are bound to fall to a considerable extent in any case), a Constitution which provides reasonable protection to the individual and to minorities and which cannot be taken away by legal means, and reasonable confidence that law and order can be maintained by security forces operating under the control of a Government that itself respects the Constitution. We shall have ultimately to decide whether in our view there is a reasonable chance of this being achieved on independence. If we think there is not, we shall have to face u p to all that is involved in postponing independence and continuing to govern ourselves, probably in such circumstances by decree and without any African co-operation. 60373
6. I think it is important that we should take our decisions in stages and in the right order. For example, the question of maintaining facilities for British forces in Kenya cannot be tackled adequately until there is a responsible Government with whom to negotiate. Approaches at the moment to the two political parties cannot produce anything but a rebuff. T h e stage we are now facing is the Constitutional Conference, and our aim in this, I suggest, should be to try to frame a Constitution which gives the maximum of legal protection to minorities and to individuals. 7. The two parties—K.A.N.U. and the Kenya African Democratic Union (K.A.D.U.)—have been working hard on their constitutional ideas with the assistance of Sir Ralph Hone, whom I sent out as constitutional adviser, and other legal experts whom they are employing. While I am encouraged that they should be tackling this task so seriously, it must be admitted that their ideas are still far apart. K.A.D.U. are pinning their faith to what they call a federal or regional system, while K.A.N.U. are in favour of a single unitary system of government, with substantial powers for local government units entrenched in the Constitution. 8. But though their views are at present wide apart, I believe, myself, that underneath it all there may be more potential agreement than appears at first sight. If we can sweep away the verbiage about federalism and unitary state, and so on, and come down to the hard facts of powers and safeguards, we may be able to reach some agreement. What K.A.D.U. and their supporters need is protection for minority tribes in such matters as land rights, tribal customs, etc., in a form which cannot be destroyed. K.A.N.U. are prepared to make reasonable provision in these matters, and the problem will be to ensure that this provision is lasting. I doubt if a provision that amendments to the Constitution can be made only by say a 75 per cent, majority will be adequate, but I believe it should be possible to devise a system whereby features of the Constitution which affect minorities can be changed only with the consent of certain bodies outside the central Parliament, e.g., the local or tribal authorities. If this can be done we shall have achieved something really worthwhile for the minority tribes. 9. The position of the Europeans is more difficult. K.A.N.U. obviously are determined to separate the Europeans from the African tribes, and if they wish to d o so, I don't see how it can be prevented. Protection for the Europeans must lie in a Bill of Rights and an independent judiciary. Both these are provided for in the K.A.N.U. and, I understand, K.A.D.U. proposals but the problem from the European point of view will be to ensure that in practice they will be fully effective. This, it seems to me, is the real debt we owe to the European community in Kenya. 10. I conclude, therefore, that so far as the present conference is concerned, we should try hard to get agreement on a Constitution that provides, so far as any legal system can provide, protection for tribal minorities and for European individuals. 11. Looking to the future, the great question will be, to what extent it is likely that an extremist group or party would overthrow such a Constitution, thus leading to a breakdown of law and order on a major scale. On our answer to this must depend the view we take about the date of independence and the future of British forces. I suggest we cannot make this assessment now, until we have seen how the conference goes, and until we have had a few months' experience thereafter. In the meantime, however, there will be clear advantage if the " moderate " wing of K.A.N.U., led by Mboya, can be split off from the party generally, and in particular from the extreme group—men of violence and of Communist contacts—led by Kenyatta, Odinga and Ngei. The Governor thinks that this could perhaps be done. While I would not rate the chances very high, it would be of so much advantage for the future of Kenya and for the solution of our problems there, that I think the possibility is well worth pursuing, and I shall take any opportunity of doing so that presents itself at the conference. R. M. Colonial Office, S.W. 1,
6th February, 1962.
6. I think it is important that we should take our decisions in stages and in the right order. For example, the question of maintaining facilities for British forces in Kenya cannot be tackled adequately until there is a responsible Government with whom to negotiate. Approaches at the moment to the two political parties cannot produce anything but a rebuff. The stage we are now facing is the Constitutional Conference, and our aim in this, I suggest, should be to try to frame a Constitution which gives the maximum of legal protection to minorities and to individuals. 7. The two parties-—K.A.N.U. and the Kenya African Democratic Union (K.A.D.U.)—have been working hard on their constitutional ideas with the assistance of Sir Ralph Hone, whom I sent out as constitutional adviser, and other legal experts whom they are employing. While I am encouraged that they should be tackling this task so seriously, it must be admitted that their ideas are still far apart. K.A.D.U. are pinning their faith to what they call a federal or regional system, while K.A.N.U. are in favour of a single unitary system of government, with substantial powers for local government units entrenched in the Constitution. 8. But though their views are at present wide apart, I believe, myself, that underneath it all there may be more potential agreement than appears at first sight. If we can sweep away the verbiage about federalism and unitary state, and so on, and come down to the hard facts of powers and safeguards, we may be able to reach some agreement. What K.A.D.U. and their supporters need is protection for minority tribes in such matters as land rights, tribal customs, etc., in a form which cannot be destroyed. K.A.N.U. are prepared to make reasonable provision in these matters, and the problem will be to ensure that this provision is lasting. I doubt if a provision that amendments to the Constitution can be made only by say a 75 per cent, majority will be adequate, but I believe it should be possible to devise a system whereby features of the Constitution which affect minorities can be changed only with the consent of certain bodies outside the central Parliament, e.g., the local or tribal authorities. If this can be done we shall have achieved something really worthwhile for the minority tribes. 9. The position of the Europeans is more difficult. K.A.N.U. obviously are determined to separate the Europeans from the African tribes, and if they wish to do so, I don't see how it can be prevented. Protection for the Europeans must lie in a Bill of Rights and an independent judiciary. Both these are provided for in the K.A.N.U. and, I understand, K.A.D.U. proposals but the problem from the European point of view will be to ensure that in practice they will be fully effective. This, it seems to me, is the real debt we owe to the European community in Kenya. 10. I conclude, therefore, that so far as the present conference is concerned, we should try hard to get agreement on a Constitution that provides, so far as any legal system can provide, protection for tribal minorities and for European individuals. 11. Looking to the future, the great question will be, to what extent it is likely that an extremist group or party would overthrow such a Constitution, thus leading to a breakdown of law and order on a major scale. On our answer to this must depend the view we take about the date of independence and the future of British forces. I suggest we cannot make this assessment now, until we have seen how the conference goes, and until we have had a few months' experience thereafter. In the meantime, however, there will be clear advantage if the " moderate " wing of K.A.N.U., led by Mboya, can be split off from the party generally, and in particular from the extreme g r o u p - m e n of violence and of Communist contacts—led by Kenyatta, Odinga and Ngei. The Governor thinks that this could perhaps be done. While I would not rate the chances very high, it would be of so much advantage for the future of Kenya and for the solution of our problems there, that I think the possibility is well worth pursuing, and I shall take any opportunity of doing so that presents itself at the conference. R. M. Colonial Office, S.W.1, 6th February, 1962.
Printed for the Cabinet.
February
1962
Copy N o .
C. (62) 2 3
9th February,
50
1962
CABINET
DEFENCE
WHITE PAPER,
1962
N O T E BY THE MINISTER OF DEFENCE
Attached for the approval of my colleagues is a revised draft of the Statement on Defence for 1962. It takes into account the amendments agreed by the Defence Committee on 7th February. H.
Ministry of Defence, S.W. 1,
9th February, 1962.
60381
W.
BOOK PROOF C
STATEMENT ON
DEFENCE
1962
The Next Five Years
Presented
to Parliament by the Minister of by Command of Her Majesty February 1962
LONDON
,
HER MAJESTY'S STATIONERY NET
Cmnd.
Defence
:
OFFICE
BOOK PROOF C
STATEMENT ON
DEFENCE
1962
The Next Five Years
Presented
to Parliament by the Minister of by Command of Her Majesty February 1962
LONDON
,
HER MAJESTY'S STATIONERY NET
Cmnd.
Defence
:
OFFICE
CONTENTS Page INTRODUCTION
...
...
3
PART I . — T H E SETTING
Alliances Overseas Bases and Garrisons War in the Nuclear Age Disarmament and Nuclear Tests Defence and the Economy
...
3 4 4 5 5
PART II.—MILITARY COMMITMENTS
Western Strategic Nuclear Deterrent—Britain's Contribution NATO Mediterranean and Near East The Middle East Africa ... Far East The Atlantic and the Western Hemisphere
6 6 7 7 8 8 9
PART I I I . - T H E FORCES
Roles of the Services The Royal Navy The Army The Royal Air Force Manpower Organisation of the Services The Ministry of Defence Command Arrangements Research and Development Civil Defence
9 11 11 12 13 14 15 15 15 16
CONCLUSION
17
APPENDIX—DEFENCE STATISTICS, 1 9 6 2 - 6 3
18
2
Statement on Defence, 1962' INTRODUCTION 1. In 1957 the Government laid before Parliament a statement of Britain's future policy for defence which looked forward five years to 1962. This year's statement deals with the further evolution of defence policy. 2. It therefore sets out in some detail the basic objectives of the nation's external policy for which armed forces, are or may be necessary; discusses the problems of war in the nuclear age; and takes account of the economic factors which also condition the allocation of national resources to defence. A careful balance has to be struck before long-term decisions can be taken about the strength of the forces, their equipment, deployment and strategy.
PART I . - T H E
SETTING
3. The basic objectives of Britain's defence policy will remain: (a) to maintain the security of this country; (b) to carry out our obligations for the protection of British territories overseas and those to whom we owe a special duty by treaty or otherwise; (c) to make our contribution to the defence of the free world and the prevention of war in accordance with the arrangements we have with individual countries and under collective security treaties. We seek to exercise military power only when and where it is essential for the furtherance of these objectives, to do this with forces whose total claims on our resources are consistent with the maintenance of a sound economy, and to devise a deployment and a strategy that can rapidly be adapted to changing circumstances. Over the next decade there will undoubtedly be further rapid developments in science and technology. New nations and new national groupings will emerge. We can expect no change in the relentless pressure of every kind from the Communist powers in pursuit of their long-term aim of bringing all mankind within their system. Alliances 4. The defence policy of many nations to-day is chiefly determined by their membership of collective security alliances. Some nations can rely on membership of one of these alliances to meet all their basic objectives. Britain's case is different. We provide simultaneously contributions to three collective security alliances, N A T O , C E N T O and SEATO. . Thus we must be able at any time to maintain forces in three areas of the world. On the Continent of Europe we have stationed large forces for the last 16 years in complete contrast with our previous military dispositions. In addition 3
we must be able to bring force to bear in areas of the world in which we have responsibilities of our own outside the scope of the three collective security alliances. The contribution which we make to each of these alliances must be judged in the light of our total contribution to the defence of freedom and the maintenance of peace, not only in Europe but also in the Near East, the Middle East and the Far East, all areas of vital interest of the Free World as a whole. War to-day, wherever it might start, would be an immediate threat to the whole world. Overseas Bases and Garrisons 5. The word " b a s e " is often applied indiscriminately to any place overseas where British forces are stationed, and misleading arguments are sometimes constructed on the false premise that a static garrison is a base. The purpose of a garrison is to guard and help to maintain law and order in the place where the garrison is located. Thus the need for a garrison normally flows from the responsibility of sovereignty or agreement. The military need for an overseas base, however, is determined by the time required to deploy forces and weapons where danger threatens. A base is thus a place where troops, ships, aircraft, heavy equipment, supplies and facilities for maintenance and repair can be kept for military operations elsewhere. In the Mediterranean, for example, although Army garrisons for local defence purposes will be maintained in Gibraltar and Malta, neither of them is now a base for Army operations elsewhere. Cyprus remains, primarily, an air base, and we shall continue to require naval and air operating facilities at Gibraltar and Malta. Aden, on the other hand, is an Army and Royal Air Force base, and Singapore is a base for all three Services. 6. The need for garrisons of British troops to support the civil power in internal security emergencies has demonstrably diminished already and may be expected to diminish still further. At the same time, we may suffer restrictions on our freedom to use some territories for military purposes, and we must accordingly adapt our strategy. We must insure against the possible loss of fixed installations overseas by keeping men and heavy equipment afloat, and by increasing the air and sea portability of the Strategic Reserve. This does not imply evading commitments. Greater mobility by air and sea is the best way of fulfilling efficiently over the next five to ten years the requirements set out in paragraph 3. War in the Nuclear Age 7. In 1957 the West had undoubted superiority in the capacity to deliver strategic nuclear weapons. To-day the West still has superiority but each side has the capacity to inflict upon the other a degree of devastation which has never before in human history been either possible or imaginable. An armed clash involving the vital interests of either side is, therefore, likely to lead to the virtual destruction of both and not merely to conquest or defeat. This truth must increasingly condition the attitude of powers to the use of force as an instrument of policy, for Governments can no longer choose to have either a full-scale conventional war or a limited war without risking the use of n u d e a r weapons. So far in history, peace has apparently inevitably 4
been punctuated by wars of steadily increasing ferocity. The massive deterrent effect of nuclear striking power is a new fact which, if we can maintain an effective balance of force, provides a justifiable hope of holding the peace until disarmament provides a more lasting solution. 8. We and our allies must therefore be able to deploy wherever necessary sufficient forces to hold this balance and thus prevent tension from breaking into a major conflict. Our policy of deterring war has been severely tested in the past twelve months in Europe, the Middle East and the Far East. So far it has succeeded. W e must make it clear to potential aggressors, however, that we should strike back with all the means that we judge appropriate, conventional or nuclear. If we had nothing but nuclear forces, this would not be credible. A balance must be maintained, therefore, between conventional and nuclear strength. Neither element must be so small as to encourage an aggressor to seek a quick advantage, or to risk a provocative local incident escalating into a major war. 9. I n short, we must maintain carefully balanced forces to deter every form of aggression and military threats. The Government do not believe that major war could long continue without one side or the other resorting to nuclear weapons. It is therefore the prevention of war that is vital rather than preparations for long drawn out conventional war. Disarmament and Nuclear Tests 10. The Governments object remains the achievement of general and complete international disarmament, to be attained by stages subject to effective control. They consider that the highest priority should be given to a Treaty banning further nuclear weapons tests, again subject to effective verification and control. The Government have worked patiently to reach agreement on these two issues which they regard as of outstanding importance; they will continue to do so in spite of the little success that has been achieved so far. Nevertheless, no one who has really understood the significance of the advent of nuclear weapons can seriously propose that the elimination of nuclear weapons can be separated from conventional disarma ment. One without the other might not lessen, but only increase the risk of large conventional wars (which only appear less terrible now by comparison with nuclear war). Nuclear and conventional disarmament must therefore go hand in hand.
Defence and the Economy 11. I n 1962-63 the Defence Budget will be £1,721 million or 7 per cent, of the Gross National Product. In normal conditions, forward budgeting for ,defence needs to be for periods of not less than five years at a time. Only in this way can continuity of planning and production be provided. We must also fit defence into the general study of public expenditure in relation to prospective resources, and as part of the new forward look at Defence Policy expenditure is being re-examined in'every detail. All public expenditure programmes, moreover, have an important effect on the economy including the balance of payments. For most of these. f
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programmes, this impact derives from the taxation required to finance them, and the non-productive manpower they absorb; for some, such as defence, other factors need careful watching, such as their competition with export potential in certain sectors of industry, and their direct expenditure overseas. 12. Our task here, the difficulty of which should not be underestimated, is not to cut defence expenditure but to contain it. Although it is our present aim to see that the percentage of the Gross National Product absorbed by defence does not rise significantly, some increase in its cost in absolute terms is to be expected as the national product itself increases.
PART II.—MILITARY COMMITMENTS Western Strategic Nuclear Deterrent—Britain's Contribution 13. When the Government of the day decided to embark on the arduous task of becoming a military nuclear power, the only other country which possessed a nuclear arsenal was the United States. Since then, the USSR has been added to the number and France is on the way to achieving a nuclear capability. Although the British effort in this field is manifestly smaller than that of either the United States or of the USSR, and although it consumes only about 10 per cent, of our defence resources, our contribution to the Western strategic deterrent remains significant. It is by itself enough to make a potential aggressor fear that our retaliation would inflict destruction beyond any level which he would be prepared to tolerate. Moreover, it adds considerably to the flexibility and dispersal of the total nuclear forces available to the West and thus to their retaliatory power. The efficacy of our deterrent will therefore be maintained throughout the 1960s by using our V-bombers and fitting them with stand-off weapons, Blue Steel in the first instance and later Skybolt. NATO. 14. The safety of our own country lies in the success of the common defence of the North Atlantic area. The Government do not believe that the defence of Europe could be left to long-range nuclear weapons alone, nor that its fate could be decided by long drawn out fighting limited to conventional forces. T h e Government wish to ensure that N A T O forces are balanced and N A T O strategy flexible. 15. Britain's duty is to contribute not only to the formulation of an agreed strategy but to make available a fair share of the forces required to fulfil that strategy. Here we have a particular problem. We have to stake account of the tasks we have to perform in other parts of the world, tasks which contribute to the containment of Communism and the maintenance of peace and order in areas whose stability is vital to the West. Moreover, our contribution to the N A T O shield forces means a deployment of forces overseas and, therefore, a heavy burden on our balance of payments. After an 6
impartial examination of our case N A T O recognises the gravity of this burden' and we hope to negotiate adequate means for relieving us of at least some of the strain on our balance of payments. Yet we accept that the provision of adequate forces to support the strategic objectives of N A T O must continue to be one of Britain's primary responsibilities as far as we can see into the present decade. During this period the proportion of these forces to be stationed on the mainland of Europe and in Britain respectively must depend to a large extent on the balance of payments position. Meanwhile we have taken steps in the Army Reserve Bill to maintain the strength of B.A.O.R. B.A.O.R. could, if the Berlin situation deteriorated further, be brought up to war establishment within a matter of days by the recall of reservists.
Mediterranean and Near East 16. Britain no longer has to discharge alone her obligations in the Mediterranean. To-day, the maritime forces of the allied nations are sharing a N A T O responsibility there. So far as Britain is concerned, we also have a responsibility to contribute an air strike force in support of C E N T O and, under our treaty, to help with the defence of Libya. We are adjusting our forces in the Mediterranean in recognition of the fact that our responsibilities there are shared with our allies; this process will continue. For the Royal Navy, the main base will be in Britain, but there will continue to be the need for forward operating facilities in Gibraltar and Malta. The Royal Air Force will continue to need airfield facilities at Gibraltar and Malta, and both places will continue to require small local garrisons. A garrison will be maintained in the British Sovereign Base Areas in Cyprus which will continue to be the main base for our air strike force in support of C E N T O and for the location of N A T O early warning facilities and wireless stations essential for our world-wide network of military communications. T h e land forces in the Sovereign Base Areas will be adjusted to the level adequate to safeguard these facilities and to maintain stockpiles and other installations needed to allow rapid reinforcement. The Royal Air Force will continue to require staging facilities ait El Adem and Tripoli and the continued presence of a small land force may prove necessary to meet our treaty obligation to help in the defence of Libya against external aggression. In short, while we shall continue to maintain naval or air facilities with some land forces in Gibraltar, Malta and Cyprus, in none of these places need we base continuously large land forces for operations elsewhere; if necessary, such forces would be provided from Britain. Certain consequential changes to the Command structure in this theatre are referred to later.
The Middle East 17. Peace and stability in the oil producing States of Arabia and the Persian Gulf are vital for the Western world. We are, and shall remain, responsible for military assistance to these. States in the area to which we are bound by treaty or which are otherwise under our protection. We have an obligation under treaty to protect the A r a b Rulers of the Federation and other States in the Aden Protectorate and direct military responsibility Joi the defence of Aden Colony. This has meant stationing a garrison in Aden Colony, and providing detachments for the assistance of Arab forces in the 7
Protectorate. For possible operations in the Gulf we have relied on Aden as a base and on reinforcing from Kenya. Henceforward, we plan to keep land forces psrmanently stationed in Aden and the Gulf and to reinforce them rapidly in emergency not only by air but also by means of an amphibious inter-service task force East of Suez capable of putting ashore in the threatened areas land forces, and their heavy equipment, and of providing air and communications support.
Africa 18. At present we maintain in Kenya a part of our Army Strategic Reserve, which is available for supporting the civil power in the African territories for which we are responsible and as a reinforcement for our forces in the Middle East, primarily for operations in the Persian Gulf. As explained in the preceding paragraph, alternative arrangements will be made to support operations in the Middle East theatre. During the sixties, therefore, our military requirements in East and Central Africa will have to be re-examined in the light of a continuing need to support the civil power. This may require the maintenance of forces in the area, but there will be no long-term requirement for a base. In addition, we shall hope to retain facilities there for air transit, staging and force training normally accorded by Commonwealth countries to each other.
Fas- East 19. In the Far East, Britain has made it clear, with other signatories of the Treaty of Manila, that we are vitally interested in the preservation of peace and stability in South-East Asia. We have a responsibility for assisting in the forward defence of Australia and New Zealand. We share with them a close concern for the defence of the Federation of Malaya for which Britain accepted obligations under a Defence Agreement in 1957. Hitherto our contribution has been to maintain with Australia and New Zealand the Commonwealth Brigade Group in Malaya as well as other powerful forces stationed both in Malaya and Singapore. The Government have already welcomed as a desirable aim the inclusion, of North Borneo, Sarawak, Brunei and Singapore in the proposed Federation of Malaysia. We hope that the creation of this new State would contribute to the general stability of the area. We have agreed with the Malayan Government that in the event of the creation of the proposed Federation of Malaysia the Agreement of 1957 and its annexes shall be extended to all territories of the Federation of Malaysia, subject to the proviso that the Government of the Federation of Malaysia will afford to the Government of the United Kingdom the right to continue to maintain the bases and other facilities at present occupied by their Service authorities within the State of Singapore and will permit Britain to make such use of these bases and facilities as Britain may consider necessary for the purpose of assisting in the defence of Malaysia, for Commonwealth defence and for the preservation of peace in South-East Asia. The new State would of course become responsible for internal security throughout its territory and this would in due course relieve Britain of a considerable responsibility in respect of Singapore for which a 8
number of major units of the British Army are at present stationed hi Malays! -S and Singapore. Discussions are now proceeding with the Malayan authorities- & on how this changeover could best be achieved. In the 1960s therefore our forces in the Far East will comprise land, sea and air forces with a diminished internal security role but a continuing task, in conjunction with our allies, for the preservation of peace in the area. Our main base will continue to be , Singapore with forces, including our contribution to the Commonwealth Brigade Group, also stationed in the Federation of Malaya. 20. There will also be a continuing need for a garrison in Hong Kong for the purpose of internal security and as an earnest of our intentions to maintain our position in the Colony. Any military forces required to deal with emergencies in other countries under our sovereignty or protection in the Indian Ocean or Pacific will be provided in the first instance from the forces we plan to have available in the area for other purposes. The Atlantic and the Western Hemisphere 21. In the Atlantic, we shall continue to contribute to N A T O naval forces under the command of S A C L A N T . We are responsible for the internal security and external defence of our South Atlantic and Caribbean dependen cies. We meet this commitment at present with local garrisons and our naval dispositions in the South Atlantic. These garrisons will no longer be our responsibility in those of our Caribbean dependencies which reach sovereign independence. Should they, however, thereafter seek our assistance, Britain will remain the main base for this task.
P A R T III.—THE FORCES Roles oi the Services 22. Our armed forces provide a contribution to the strategic nuclear power of the West. We support N A T O and S E A T O with land, sea and air forces, and C E N T O with our air striking force. In addition, we have to maintain both a military presence in, and a capacity for rapid reinforcement of, some areas where we have responsibilities beyond the scope of these three regional alliances. 23: This requires forces organised and trained for mobility, both in the United Kingdom and in our overseas bases, as well as the means for moving them. In the United Kingdom we have the Army's Strategic Reserve and the transport aircraft at the disposal of the Royal Air Force. There is already the closest liaison in training and operations between the appropriate formations of the Strategic Reserve and Transport Command. The considerable degree of sea and air mobility which these forces have already achieved was amply demonstrated in the operations in July 1961 to support Kuwait. Land forces in excess, of brigade strength, with their heavy equipment, were gathered from a wide area and landed by sea and air with 9
great speed. This operation showed that the mobile forces we are now building up are well fitted for their task. These include one Commando ship (H.M.S. Bulwark) in commission; another, H.M.S. Albion, is commis sioning in July. These ships will normally carry a fighting force of 750 men consisting of a Royal Marine Commando and its associated battery of the Royal Artillery, the vehicles and equipment necessary to support them in operations ashore, a squadron of helicopters and four Assault Landing Craft. In emergency each ship could carry some 1,200 men. In addition, the Amphibious Warfare Squadron, now stationed in the Middle East, will continue to be available to lift heavy equipment and discharge it at the beachhead. The ships of this squadron will be replaced by a new type of Assault ship with improved capacity and speed; the ordering of the first of these ships has already been announced and the Government have now decided that a second will be ordered in the course of the financial year. In addition the first of a new class of logistic ship (the L.S.L.) is being laid down this year for the Army. Air cover for a task force of this kind will be provided by a carrier, and a cruiser will also normally be available providing gun support and the capacity to carry further Army troops or Royal Marines. Similarly, the effectiveness of the present long-range transport fleet of the Royal Air Force (Britannias and Comet IIs) which can carry, in a single lift, about half a brigade equipped at light scales, will be steadily increased by the addition of new aircraft. The Comet I V is now entering service and orders have been placed for the VC-10 and the Belfast. Argosies are now being delivered to reinforce the Medium Range Transport Force. A small force of mobile light bomber and fighter squadrons is also always available to reinforce the Royal Air Force overseas and to accompany the strategic reserve forces if required. The Royal Air Force also proposes to reinforce its strategic transport force in times of emergency by chartering civil aircraft as necessary. 24. Development of equipment, doctrines and techniques for mobile forces calls for a high degree of inter-Service co-ordination. This requirement has so far been met by the L a n d / A i r Warfare Committee and by Amphibious Warfare Headquarters. These two organisations are now to be replaced by a new Joint Service Staff in the Ministry of Defence under a senior officer as director, which will serve a committee comprising representatives of the Naval, General, Air and Defence Staffs under the chairmanship of the Deputy Chief of the Defence Staff, responsible to the Chiefs of Staff. This new organisation will be charged with advising the Chiefs of Staff on all aspects of joint Service operations including training. In recent years, experience has been gained by combined exercises overseas, amongst which one in North Africa in 1959 and one in 1960, as well as one in the Arabian Peninsula and another in Borneo in 1961, were the more important. This form of joint exercise will continue on an increasing scale in order to give further experience in joint operations and maintain a British presence wherever this may be necessary. 25. Outside Europe, our forces will essentially become joint Service task forces using the air and the sea to transport men and equipment and to support operations conducted ashore. T h e reinforcement potential provides us with forces of all arms, capable of application anywhere in the world within a matter of days. We must accustom ourselves to thinking in terms of the
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total required strengths of the joint Service armed forces. The identity and loyalties of the three Services must be retained but the present high degree of co-operation will necessarily be increased. The Royal Navy 26. The ability to assure free movement by sea at the right time and place remains of fundamental importance to these islands; indeed the sea may in certain circumstances be the one open highway for strategic movement free of international political hindrance. T o discharge this responsibility we "need a balanced and versatile Fleet capable of bringing force to bear under the sea, on the surface and in the air. By the use of task forces with a significant amphibious capability, seaborne military and air power can be exerted wherever our interests require it, to preserve or if necessary to restore peace. The areas of our most vital interests to-day may not all be the same in a few years' time. The great assets of seaborne power are its mobility and flexibility, which enable it to be redeployed and concentrated wherever our policies require. A continuing need will be for effective and up to date anti-submarine forces and equipment. 27. During the next ten years or so, we may expect the Navy to be based on the present balanced Fleet, though with a turnover to nuclear power for submarines, and some further emphasis on afloat support to supplement our shore bases and increase flexibility. Seaborne task forces will include commando ships and assault ships specially designed to carry, land and sustain, or if necessary to hold poised at sea a striking force of troops with their tanks, guns and logistic backing; frigates and guided missile ships, for anti-submarine and air defence; and aircraft carriers with highly versatile aircraft capable of long-range reconnaissance and strike, air defence, and close support for the Army. The new Buccaneer strike aircraft is now in squadron service and the first squadron will embark in H.M.S. Ark Royal later this year. The first of our guided missile destroyers, whose armament includes Seaslug and Seacat missiles, will commission this year. These County-class destroyers are of revolutionary design and the most up to date of their type in the world. Looking further ahead, existing aircraft carriers will be coming to the end of their lives, starting with H.M.S. Victorious in about 1970. It is difficult to forecast with certainty what our requirements for this type of ship ten to fifteen years ahead will be. Clearly any new generation of carriers would have to be designed primarily for the role of support of amphibious and land operations. They would also have to have a range of aircraft common to the Royal Navy and the Royal Air Force so that they could be operated either from carriers or from shore bases. As it takes no less than nine years to plan, build and work up a carrier, the Government have decided to put the necessary design work in hand.
The Army -. 28. We shall continue to allot a substantial force to N A T O . The British Army of the Rhine is trained and equipped to use both conventional and nuclear weapons. Its organisation, equipment and deployment may vary to suit the tactical doctrine of the time but it will continue to form an 11
essential part of the N A T O shield forces. In other overseas theatres, the; Army will continue to provide the garrisons which are still. essential to the security of our bases and certain dependent territories and will, in addition, maintain mobile and well equipped forces at bases in the Arabian Peninsula and Singapore to support our treaty obligations in these areas. 29. The changing political circumstances outlined above will stress the importance of the Strategic Reserve in the United Kingdom. This will be maintained as a mobile force, trained to move by air or sea at short notice to reinforce B A O R or any other overseas theatre. The Army will increasingly be trained to be ready to fight in widely differing types of terrain and climate and thus become accustomed to rapid changes of environment. Over the period the Army will be completely re-equipped with its new family of weapons. During the next two years it will take into service more of the Malkara wire-guided anti-tank missile; Wombat, an anti-tank gun; and a general purpose machine gun. They will be followed among other items of equipment by a new heavy tank, the Chieftain, already on order, and an improved wire-guided anti-tank missile, Vigilant. T h e Royal Air Force 30. The Royal Air Force provides our main nuclear strategic striking power. It is responsible for shore based air defence at home and overseas and provides tactical strike as well as close support and reconnaissance for land forces. It undertakes the strategic, tactical and short-range airlift to move the Army and its supplies, and operates the maritime aircraft which co-operate with the Royal Navy in the anti-submarine role. 31. The British contribution to Western strategic nuclear power will continue to be the responsibility of the V-bomber force of Vulcans and Victors. Similarly we shall continue to contribute improved tactical strike and reconnaissance aircraft equipped for nuclear or conventional warfare to N A T O , C E N T O and S E A T O . The TSR-2 which is planned to come into service in the mid-sixties will make an important contribution in this role. 32. The growing emphasis on air mobility as an essential requirement for our strategy is being matched by an increase in both the carrying capacity and speed of our air transport force. New types of aircraft coming into service are the Comet I V and the Argosy, with the Belfast coming along a little later, and orders have been placed for the VC-10 [and Herald Avro 748] for long [and short] range transport. In the helicopter range the Whirlwind and the Belvedere are already in service, and orders have been placed for the Wessex.' ' -'''' '--*. 33. In future we look to vertical take-off and landing and other advanced techniques to increase the capacity of tactical and transport aircraft to operate in close co-operation with the Army in the field in the absence, if need be, of any but rudimentary facilities. I t is intended that future generations of vertical take-off and landing aircraft (V.T.O.L.) for the Royal Air Force shall be capable of operating from the carriers of the day. Further ahead we have in hand studies on the possibilities of using space for communications and reconnaissance. ,.
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Manpower 34. In 1957 the decision was taken to abandon conscription, on which we had relied since 1939, and to rely entirely on voluntary forces. It is sometimes asked why it is that we are almost the only N A T O country which can afford to do without national service. Our decision was not so much a departure from the past as a reversion to our normal well tried practice. This country, an island with world-wide interests, has always needed long-service men in balanced sea, land, and (more recently) air forces. Balance and mobility have been as important for us as numerical strength. Although our direct involvement on the mainland of Europe has increased and our other overseas commitments have diminished, this fundamental importance to us of balance and mobility remains. 35. T o discharge our world-wide responsibilities effectively we must be able to bring to bear, at very short notice, forces which are in all respects ready to fight. This can only be done with highly trained, well equipped formations with great long range mobility. In all three Services the degree of individual professional skill which is required to play an adequate part in such operations, with our highly complex modern equipment, is very high. T h e same men must also be able to fight in a European theatre battle. It is our view that a period of conscription cannot be long enough both to enable the necessary state of training for all these tasks to be reached, and also to yield a worth-while term of service thereafter. 36. In 1957 certain broad assumptions were made about the size of the regular forces we should need. The trends described in earlier paragraphs show that our requirements are unlikely to increase. An appraisal of Service manpower over the next five to ten years shows that the broad plan devised in 1957 was soundly based, and that the numbers we can obtain by voluntary recruitment will be adequate for our strategy in the future. 37. The Governmenfs five-year plan to replace the National Service system with all regular forces will be completed by the end of this year. These forces will be highly trained both technically and professionally and well equipped. The Government intend to keep their pay and conditions of service under regular review. 38. The size of the forces we intend to maintain in peacetime must, if national resources are not to be wasted, be related to peacetime needs. They will in any case require some 50 per cent, of the total Defence Budget for their pay, clothing, maintenance, etc. If as may happen from time to time in the present state of relations between the Great Powers tension rises to a point beyond that which the peacetime forces can deal with, we must have a reliable means of strengthening them at short notice. Such a situation has developed over Berlin and the Government have thought it essential as a short-term measure to take powers to retain s o m e ' of the existing National Servicemen in the Army for an additional six months' full-time service. As a longer term measure we need a reserve of trained m e n - w h o are willing to be called up for a limited time whenever the Government consider it necessary. This is the purpose of the Territorial Army Emergency Reserve. An examination of the whole reserve system is in hand. 13
Organisation of the Services 39. Increasing stress will be laid on interchangeability of functions and mutual support and assistance between the three Services, so that we get the best value out of our Service manpower as a whole. Where necessary changes will be made over the next few years to secure an orderly process of evolution to complete the concept laid down in the White Paper on the Central Organisation for Defence (Cmnd. 476) of July 1958. The purpose is not to revolutionise the organisation of the forces but rather to secure co-operation and greater economy. The separate tasks, weapons and organisation which differentiate the " teeth " elements of the three Services operate also to separate their support services. Nevertheless, in many of the administrative and support functions of the Services the similarities outweigh the differences and there may well be scope for further rationalisation in the interests of efficiency and economy both of money and manpower. No single method of bringing these similar functions into closer relationship will suit all cases. One of the most useful methods is likely to be the agency arrange ment under which one Service acts for the other two. Much has already been accomplished by this means. For example, the supply of food, petrol, oil and lubricants is organised on these lines in many areas in the United Kingdom and overseas. T h e Medical Services also operate agency arrangements on a large scale. Thus in Germany, Gibraltar, East Africa, North Africa, Hong Kong, and Mala)'a the Army provides practically all the hospital services needed by the other two. In particular cases some form of integration may be desirable, e.g., on the lines of the administration of Services hospitals in the United Kingdom. These remain under the individual Services, but the total number of beds is related to the total Service population: a serviceman can be admitted to the nearest hospital irrespective of the Service to which he belongs; and drugs and other medical supplies are centrally procured. It is intended to integrate the long-range communications systems of the three Services. As a first essential step towards this a common signals procedure is being evolved which will enable the signals organisation of all three Services to work more readily on an interchangeable basis. 40. Because the needs of each Service and function are so diverse each of them will need separate examination and if changes are needed a form of organisation will have to be devised to meet each case. An inter-Service committee, under the Ministry of Defence, has been established for the purpose and progress is being made. 41. It has been decided as a result of a full examination to introduce officers to joint Service problems earlier than in the past by increasing the amount of Joint Service Training not only at the individual Staff Colleges, but also by laying greater emphasis on joint Service exercises, lectures and discussions.
The Ministry of Defence 42. The Governments intention is that the Ministry of Defence should remain a relatively small Ministry, charged with the formulation of policy, the execution of operations and the allocation of defence expenditure. It should also co-ordinate, through the Chiefs of Staff and the Defence Research 14
Policy and other Committees, the development of weapons and weapons systems. The administration and day-by-day management of the individual armed forces must continue to be carried out by the Service Ministries. When decisions on operational matters are required by Commanders overseas, they are given by the Minister of Defence with the advice of the Chiefs of Staff. As a result of experience gained arrangements have been made to set up a small operational staff that is always at immediate readiness to man the War Room in the Ministry of Defence on a joint-Service basis.
Command Arrangements 43. In order to meet our commitments in the world outside Europe, it is not enough to provide our forces with the necessary mobility equipment and base facilities. Command arrangements must also be streamlined to allow unified control to be exercised over tri-Service operations. The unified command in the Middle East (with its Headquarters in Aden) was set up with these considerations in mind. The handling of recent operations put the unified command to a test which amply proved that there are valuable administrative advantages to be derived from the unified command system. For these reasons, the Government have now decided to introduce unified command in the Far East as soon as practicable. The future arrangements for command of our forces in the Near East have been reviewed in the light of the adjustments to those forces described in paragraph 17. It has been decided that the present Unified Command Headquarters in Cyprus will no longer be required in its present form and that the Army Headquarters can be reduced in size. The Air Officer Commanding-in-Chief will become responsible for all British forces.
Research and Development 44. With general strategy settled for the period ahead we shall be able to form a much clearer view of the arms and equipment that we shall need and of the research and development programme required to produce them. At the same time, the main recommendations of a Committee which has recently reported on the management and control of research and development, in so far as they concern the control of defence research and development, have been put into effect. While all encouragement continues to be given to members of Government establishments, and also to research workers in industry, to pursue new ideas in the early stages of implementing operational requirements and devising new weapons, we have now instituted check points in the process of development so that no major development contract proper will be placed until a fully evaluated project study has been completed. The project study includes a detailed examination of the scientific and technical problems which need to be resolved and the preparation of a detailed development programme in terms of technical manpower, cost and time. 45. New ideas for research and development in the field of defence are, being generated continuously in all the countries of Western Alliance, no single member of which can afford to exploit the whole range of possibilities now that we have moved into an era of immense technological complexity characterised by ballistic missiles and space technology. For this reason we are strengthening all measures to achieve interdependence in research and 15
development both in N A T O and within the Commonwealth. Only in this way will it be possible to spread the load and economise in scarce scientific and technological resources. We ourselves will concentrate our effort in those areas in which we can hope to make the most valuable contribution to Western defence as a whole. Good examples of the kind of interdependence at which we are aiming are the joint programme that has been agreed with the German Federal Republic and the United States to evaluate the British P-1127 V.T.O.L./S.T.O.L. fighter aircraft and to develop the Pegasus engine, and the tripartite agreement with the Federal Republic and France to develop the Rolls Royce lightweight lifting engine which should have important implications for vertical take off.
Civil Defence 46. Over the next five to ten years it is clear that Civil Defence will play an important part in maintaining the general preparedness of the whole nation for any emergency, and will itself form part of the deterrent. In the report on defence for 1961 it was stated that the Government had reviewed H o m e Defence plans and concluded that some additional expenditure was needed to secure a balanced programme over the next few years. These plans have to cover a wide field, and are an integral part of our defence preparations. Departments are actively engaged in implementing a revised programme. Next year will be its second year, and the estimated defence expenditure of civil departments will be £19 37 million compared with £18 61 million for the current year. 47. Among the preparations which will be advanced, the scheme of emergency control will be further developed, and emergency radio communi cations will be provided. For the warning and monitoring organisation, a new system for rapidly passing messages over the telephone is being installed, arrangements are being m a d e for the B.B.C. to supplement other warning channels, and a start is being made with the provision of special equipment and radio communications. Stocks of emergency equipment for maintaining drinking water supplies are being increased. Stockpiling of radiac instruments for essential services will continue, and further training equipment will be provided for the Civil Defence Corps and the Auxiliary Fire Service. 48. There have been a number of joint civil/military exercises in order to test plans for military aid to the civil power, and joint planning for this purpose is continuing. 49. A n examination of the functions and organisation of the Civil Defence Corps and the Auxiliary Fire Service has been carried out, and the Govern ment now propose to discuss with the local authority. Associations certain changes designed to make the Corps and the Auxiliary Fire Service better able to discharge their role. The strength of these Services on 31st December last was over 395,000 compared with just under 380,000 on the corresponding date in 1960. 50. The Government have reviewed dispersal policy in the light of developments in the strategic situation over recent years, and have had consultations with the local authority Associations. They have concluded 16
that although the circumstances that might precede an attack upon us cannot be foreseen, it is necessary to have available a scheme which could be implemented, if it were thought right to do so, for dispersing mothers and children and other people in "priority classes" from major centres of population. The detailed application of the scheme will be worked out with the help of local authorities.
CONCLUSION 51. T o have at least in outline a long-term plan is essential if the best use is to be made of manpower and resources. N o settled weapons policy is possible in a short time-scale. This White Paper however does not attempt to set out the details of strategy and weapon systems over the period. This will be done each year in the individual Service memoranda.
17
APPENDIX
DEFENCE STATISTICS, 1962-63 Manpower 1. An analysis of the active strengths of the three Services is given in Annex I, Table 1. 2. In 1962-63 the Armed Forces will need about 51,000 male entrants. This figure includes men who enter upon regular engagements and those who enter as boys, apprentices and juniors. 3. An analysis of the Volunteer Reserve and Auxiliary Forces and National Service Reserves for the three Services is given in Annex I, Table 3.
Finance 4.
The estimated cost of the defence programme i s : £ million 1,655-60 1,721-06
(a) as estimated for 1961-62 (b) as estimated for 1962-63
The division between Departments for 1961--62 and 1962-63 is £ Admiralty War Office Air Ministry Ministry of Aviation Ministry of Defence
1961 -62 413 20 506 90 526 67 190 20 18 63
million 1962 -63 422 27 523 92 552- 15 204- 30 18- 42
1,655 60
1,721- 06
The 1961-62 figures include £13-9 million in respect of civil superannuation payments which for 1962-63 have been transferred to Civil Votes. An analysis of the 1962-63 Estimates is at Annex II. 6. In the Financial Year 1962-63 £19-37 million will be provided for Home Defence expenditure by Civil Departments. This compares with £18-61 million in the Estimates for 1961-62. An analysis of the proposed expenditure is given in Annex III.
18
ANNEX
I
.
TABLE 1.-ANALYSIS OF ACTIVE STRENGTHS
Tota Totall
1st April, 1963 (estimate)
1st April, 1962 (estimate)
1st April, 1961 (actual)
Regula Regularr Adul Adultt Males Male s National Nationa l Service.. Service.... Womenn ... Wome .. . Boy Boyss
(Figures in thousands)
Royal Navy
Army
R.A.F.
Total
Royal Navy
Army
R.A.F.
Total
Royal Navy
Army
R.A.F.
Total
87-3 0 1 3-3 4-6
152-5 64-8 6-2 7-8
131 0 13-4 6-0 7-8
370-8 78-3 15-5 20-2
86-6
128-9 5-4 6-6 7-3
374-2 31-4 16-2 21-6
87-8
166-5
132-6
386-9
3-3 4-7
158-7 260 6-3 9-6
7-1 7-7
16-9 22-5
95-3
231-3
158-2
484-8
94-6
200-6
148-2
443-4
96-2
147-4
426-3
3-5 4-9
* 6-3 9-9 182-7
* N o provision has been made in this table for the effect of the Army Reserve Bill. TABLE 2 . - F O R C E S ENLISTED OUTSIDE THE UNITED KINGDOM
Strengths as at 1st January, 1962 Royal Navy ... Army Royal Air Force Total
2,700 33,200 1.100 j
37,000
TABLE 3 . - A N A L Y S I S OF VOLUNTEER RESERVE AND AUXILIARY FORCES AND NATIONAL SERVICE RESERVES
Strength at 1st January, 1961 Normal Volunteers Part-time Volunteers from N.S. N.S. Royal Navy Royal Naval Reserve Royal Marine Forces Volunteer Reserve Royal Naval Special Reserve Women's Royal Naval Reserve
9,561 1,067
1,185 157
1,033
—
Army Territoria Territoriall Arm Armyy .. ....
114,784 114,784 Women' Women'ss Roya Royall Arm Armyy Corp Corpss (T.A. (T.A.)) .. ....
5,789 5,789 Quee Queenn Alexandra Alexandra^^ Roya Royall Arm Armyy
Nursin Nursingg Corp Corpss (T.A. (T.A.)) 2733 27 Army Arm y Emergenc Emergencyy Reserv Reservee 11,761 11,761 Women' Women'ss Roya Royall Arm Armyy Corp Corpss (A.E.R. (A.E.R.)) 30 Quee Queenn Alexandra Alexandra^^ Roya Royall Arm Armyy Nursin Nursingg Corp Corpss (A.E.R. (A.E.R.)) 97 Royal Air Force Royal Auxiliary Air Force Women's Royal Auxiliary Air Force Royal Air Force Volunteer Reserve ... Women's Royal Air Force Volunteer Reserve Royal Air Force Reserve of Officers (N.S.) and Class H of the Air Force Reserve Total
Normal Volunteers Part-time Volunteers from N.S. N.S.
11,472 1,303 9,356 1,033
8,016 882
4,684
124,927
244,39 244,3955 5,78 5,789 9
100,00 100,0044 4,498 4,49 8
616
130,248
2733 27 142,625 142,625 30
294 294 11,59 11,5944 43
97
87
936 350 2,755
382 116 2,029
46
54
35
249
46
148,198
Total
726 79 9,356 —
901 350 2,506
-
Strength at 1st January, 1962
6,926
974
81,491
81,491
-
346,827
501,951
128,973
1,094 144
Total
390 390 57 4,623 4,623
9,50 9,500 0 1,083 1,083 4,623 4,623 97 9744
2,815
55,577
158,39 158,3966 4,498 4,498
616
147,144
-
294 294 159,35 159,3544 43 87
7
96
389 116 2,125 54
4,772
52,012
52,012
259,803
393,548
ANNEX H
DIVISION OF THE DEFENCE BUDGET UNDER THE PRINCIPAL HEADINGS
Financial. year, 1962-63
(£ million)
I
1. Pay, & c , of Service personnel
2
3'
4
5
6
7
Admiralty
War Office
Air Ministry
Ministry of Aviation
Ministry of Defence
Totals
Net
Gross
A. in A.
1.35
72.61
140.04
6.96
Gross
A. in A.
73.96
2. Pay, &c.,of Reserve,Territorial
and Auxiliary Forces and
1.22 grants for administration, &c.
Net
Gross
A. in A.
133.08
123.60
4.42
Net 119.18
Gross
A. in A.
Net
Gross
1.77
—
1.77
5.31
-
26.33
1.47
3.78
0.33
1.57
0.01
A. in A.
-
Net
Gross
A. in A.
Net
5.31
344.68
12.73
331.95
20.75
0.47
1.47
266.55
7.54
259.01
0.33
60.75
3.78
56.97
0.01
66.08 57.10 27.98 5.12
4.76 8.77 5.08 0.49
61.32 48.33 22.90 4.63
0.19
156.28
19.10
-
828.90f 123.77t
705.13
1.22
18.62
0.24
18.38
0.91
0.23
0.68
3. Pay, & c , of civilians
55.93
0.64
55.29
127.09
1.52
125.57
55.73
5.38
50.35
26.33
4. Movements
10.80
0.03
10.77
29.22
1.33
27.89
16.62
2.42
14.20
3.78
15.80 11.70 4.53 0.38
2.07 1.81 0.12
5.70 13.73 9.89 . 27.70 13.15 4.41 3.04 0.38
0.69 4.82 2.49 0.23
5.01 22.88 10.66 2.81
43.00 17.70 8.95 1.52
2.00 . 2.14 2.47 0.26
41.00 15.56 6.48 1.26
1.57 1.35
-
1.35
32.41
4.00
28.41
49.59
8.23
41.36
71.17
6.87
64.30
2.92
-
2.92
237.91
29.20
208.71
174.46
88.56
85.90
260.50
18.50
242.00
498.53
330.01
...
26.27.
6.61
19.66
67.69
17.78
49.91
64.77
22.47
42.30
10.03
10.03
-
12.44
4.50
7.94
181.20
61.39
119.81
8. Miscellaneous effective services
8.37
2.46
5.91
10.66
2.93
7.73
9.58
3.86
5.72
0.98
0.98
3.38
0.20
3.18
32.97
9.45
23.52
19.75
0.06
19.69
34.40
0.30
34.10
13.55
0.13
13.42
-
-
-
-
-
67.70
0.49
67.21
466.62
44.35
422.27
651.77
127.85
523.92
616.43
64.28
340.04
204.30
23.12
4.70
...
5. Supplies— (a) Petrol, oil and lubricants (b) Foodandrationallowance (c) Fuel and light ... ... (d) Miscellaneous ... ...
6 Production and research* ... 7. Works, buildings and land
9. Non-effective charges 10. T o t a l s . . .
552.15
544.34
-
0.18
168.52
0.19
-
0.18
-
20.28
137.18
18.42 l,959.78f 238.72T 1,721.06
NOTES.—
Expenditure by the Ministry of Labour in the administration of the National Service Acts is not expected to be more than £2,500.
* Includes the cost of development work undertaken by industry under contract, the purchase of stores for research and development establishments and costs of the Royal Ordnance Factories. f. To avoid double counting Of payments by the Services to the Ministry of Aviation and War Office the cross totals of columns 2-6 have been reduced by £342-5 million.
ft H
ANNEX
III
HOME DEFENCE EXPENDITURE BY CIVIL DEPARTMENTS ( N E T )
Department
Item
1962-63 Estimate (£ million)
Class and Vote
Home Departments
Grants to local authorities; production of equipment and materials, &c.
Class HI,
3 4
12-13
Health Departments
Grants t o local authorities; maintenance of medical services including stocks of equipment and materials; emergency hospitals, &c.
Class VI,
16 18
0-94
Housing (including Scotland)
Grants to local authorities, &c.; production of equipment and materials
Class VI,
1 13
0-74
Ministry of Agriculture, Fisheries and Food (including Scotland)
Handling, storage, &c. of food stocks; grants to local authorities; storage and maintenance of equipment and vehicles, &c.
Class v ,
7 8 13 '.
2-61
Ministry of Fower
Oil storage and distribution; grant to gas industry
Class IV,
15
0-42
Ministry of Transport
Due functioning of railways and shipping; port facilities
Class IV,
13
0-43
Ministry of Works
Storage and accommodation
Class IX,
2
1-32
Board of Trade
Maintenance and turnover of stocks of materials
Class IV,
2
0-38
Various Departments
Miscellaneous
Class
V I
0-40 Total
22
19-37
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C. (62) 24
CABINET
DEFENCE POLICY Note by t h e M i n i s t e r of D e f e n c e
We a r e t o c o n s i d e r in C a b i n e t on 13th F e b r u a r y t h e 1962 Defence White P a p e r . T h i s White P a p e r h a s b e e n w r i t t e n a g a i n s t the b a c k g r o u n d of a full s t u d y b y t h e Chiefs of Staff C o m m i t t e e of B r i t i s h S t r a t e g y in t h e S i x t i e s . 2. M y c o l l e a g u e s m a y find it u s e f u l t o s e e t h e a t t a c h e d d i g e s t of t h i s Chiefs of Staff r e p o r t w h i c h g i v e s a n e x p l a n a t i o n of the p r o p o s e d d e p l o y m e n t of o u r f o r c e s t h a t l i e s b e h i n d t h e p u b l i c s t a t e m e n t s in t h e White P a p e r .
H.-W.
M i n i s t r y of D e f e n c e , S. W. 1. 8th F e b r u a r y , 1962.
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Copy fVo.
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AUTHORITY OF T H E S E C R E T A R Y , C H I E F S OF STAFF COMMITTEE
CO.So (62)49 3 1 3 T JANUARY. 1 9 6 2 , CHIEFS OF STAFF COMMITTEE D I G E S T , REPORT ON B R I T I S H STRATEGY JEN,. T K B J 5 I X T I B S i
A-P-tl^l by., ip.o
i
Secretary
At t h e i r m e e t i n g ^ on T u e s d a y , 3 0 t h January, 1962, t h e C h i e f s o f S t a f f approved t h e D i g e s t o f t h e i r report* a t Annex on B r i t i s h S t r a t e g y i n t h e S i x t i e s . 2 .
In approving
the report
the Chiefs
of
Staff:
( a )
Approved the d e s p a t c h of t h e D i g e s t to c e r t a i n s e n i o r S e r v i c e Commanders.
( b )
Took n o t e t h a t t h e F o r e i g n O f f i c e , Commonwealth R e l a t i o n s O f f i c e and C o l o n i a l O f f i c e , w o u l d b e f o r w a r d i n g c o p i e s o f t h e D i g e s t t o an a g r e e d l i s t of Overseas a u t h o r i t i e s .
(Signed)
MINISTRY OF DEFENCE, 31 ST JANUARY,
J . K . WATKINS
S.W.1.
1962.
/ *
C0S(62)8th Meeting, COS ( 6 2 ) 1 .
Minute
h
ANNEX TO C o O , S ,
(62)U'
B R I T I S H STRATEGY I N THE S I X T I E S DIGEST REPORT
THE AIM To f o r m u l a t e , o n t h e " b a s i s o f t h e g i v e n p o l i t i c a l a n d f i n a n c i a l a s s u m p t i o n s , a s t r a t e g y f o r t h e U n i t e d Kingdom i n c i r c u m s t a n c e s s h o r t of g l o b a l war to h e a d o p t e d i n t h e p r e s e n t d e c a d e a n d t o c o n t i n u e t o h e a p p l i c a b l e "beyond 1 9 7 0 ; and a l s o to recommend t h e s i z e a n d s h a p e o f f o r c e s w h i c h w o u l d h e r e q u i r e d , ' t a k i n g i n t o a c c o u n t t h e f i n a n c i a l and manpower i m p l i c a t i o n s o f t h e f o r c e s p o s t u l a t e d f o r NATO * BROAD CONCEPT OF STRATEGY 2. We h a v e "based o u r s t u d y o n t h e p o l i t i c a l a n d f i n a n c i a l a s s u m p t i o n s a n d t h e g e n e r a l d e f e n c e o b j e c t i v e s g i v e n u s "by t h e Prime M i n i s t e r , t o g e t h e r w i t h g u i d a n c e from t h e M i n i s t e r of Defence. We h a v e a l s o t a k e n i n t o a c c o u n t v i e w s e x p r e s s e d h y F i e l d Marshal S i r F r a n c i s F e s t i n g . F i n a l l y , we h a v e a d o p t e d the f o l l o w i n g c r i t e r i a f o r the s c a l e of m i l i t a r y e f f o r t to he provided: ( a )
That our l a n d f o r c e s would nowhere he i n v o l v e d on a s c a l e greater i n i t i a l l y than a reinforced brigade group.
( b )
An a s s u m p t i o n o r i g i n a l l y s t a t e d a s a b a s i s f o r o u r current l o g i s t i c planning t h a t we w o u l d n o t u n d e r t a k e a major o p e r a t i o n ( d e f i n e d a s i n ( a ) above) i n more t h a n one o v e r s e a s t h e a t r e a t a n y one t i m e , and n o t more o f t e n t h a n once i n any t h e a t r e i n a p e r i o d o f two y e a r s ,
( c )
That any p e r i o d of i n t e n s i v e f i g h t i n g i s u n l i k e l y to be p r o l o n g e d ( p o s s i b l y weeks r a t h e r than m o n t h s ) , although i t could be longer i n the Far East i f China were not openly i n v o l v e d .
( d )
That the c i r c u m s t a n c e s i n w h i c h our f o r c e s m i g h t have to i n t e r v e n e c o u l d v a r y from o c c a s i o n s when p o i n t s o f e n t r y , and p o s s i b l y l o c a l f a c i l i t i e s , would be a v a i l a b l e t o us t o o c c a s i o n s when t h e p o i n t s of e n t r y would be i n h o s t i l e hands, requiring us to f a c e oppostion to establish ourselves. We d o n o t , h o w e v e r , b e l i e v e that we w o u l d , a t l e a s t w i t h o u t A l l i e s , a t t e m p t t o i n t e r v e n e i n the f a c e of h e a v y o p p o s i t i o n r e q u i r i n g u s t o mount a full-scale assault.
3. A g a i n s t t h i s b a c k g r o u n d we s e e t h e s t r a t e g y adopt for t h i s decade b r o a d l y as f o l l o w s : ( a )
that
we
should
W e s t o f S u e z a l t h o u g h we s h a l l c o n t i n u e t o m a i n t a i n f o o t h o l d s i n t h e M e d i t e r r a n e a n a n d C a r i b b e a n we s h a l l not p r o v i d e f o r c e s l o c a l l y to meet the p o s s i b l e o p e r a t i o n a l commitments, but p l a n to r e i n f o r c e these t h e a t r e s from t h e U n i t e d Kingdom i f and as n e c e s s a r y .
-
2
("b)
E a s t o f S u e z we s h a l l d e p e n d p r i m a r i l y o n t h e a t r e f o r c e s b a s e d on f a c i l i t i e s i n t h e P e r s i a n Gulf and S i n g a p o r e - w h i c h are capable of mutual reinforcement and are "backed b y a n a m p h i b i o u s t a s k f o r c e - t o meet our commitments i n t h e Middle and Far E a s t t h e a t r e s r e s p e c t i v e l y ; but here t o o , we s h a l l b e a b l e t o r e i n f o r c e f r o m t h e U n i t e d K i n g d o m i f n e c e s s a r y . s
( c )
I n t h e U n i t e d Kingdom a s t r a t e g i c land f o r c e r e s e r v e of one ( p a r a c h u t e ) brigade group w i t h i t s a s s o c i a t e d a i r t r a n s p o r t , b a c k e d i f n e c e s s a r y b y two f u r t h e r b r i g a d e groups from one of the d i v i s i o n s earmarked f o r BAOR.
Reinforcement i n a l l cases a l t h o u g h we do n o t p l a n t o a v a i l a b l e West of Suez. 1+. In practical of Suez w i l l g i v e (a)
or (b)
terms us:
our
c o u l d b e b o t h s e a b o r n e and a i r b o r n e , have an amphibious c a p a b i l i t y n o r m a l l y
forces
in
t h e U n i t e d Kingdom and
East
A c a p a c i t y t o p r o v i d e up t o one b r i g a d e group i n i t i a l l y , E a s t or West of S u e z , a t any one time, p l u s a "battalion group elsewhere. alternatively, A capability concurrently to deploy rapidly b o t h E a s t and W e s t o f S u e z a f o r c e o f up t o an i n f a n t r y or p a r a c h u t e b a t t a l i o n group. A d d i t i o n a l l y , E a s t of Suez a Royal Marine commando o r a n i n f a n t r y " b a t t a l i o n g r o u p c o u l d "be d e l i v e r e d "by s e a .
These f o r c e s would be supported by a p p r o p r i a t e l e v e l s of n a v a l and a i r f o r c e s e i t h e r m a i n t a i n e d i n t h e t h e a t r e or d e p l o y e d a s r e q u i r e d f r o m t h e Uni ted. Kingdom. 5. It i s necessary, in m i l i t a r y prudence, to provide replacement for forces r e s i d e n t overseas once they are deployed against a planned commitment. We c o u n t o n t h e s t r a t e g i c r e s e r v e t o m e e t t h i s requirement, as w e l l as c e r t a i n d i r e c t commitments, and to provide against the unforeseeable. 6. We s e e t h i s a r r a n g e m e n t a s r e p r e s e n t i n g t h e n e x t s t e p towards a more f l e x i b l e s t r a t e g i c p o s t u r e b a s e d on s e a b o r n e and a i r b o r n e f o r c e s , and one w h i c h w i l l p e r m i t us t o c o n t i n u e to provide m i l i t a r y support f o r our n a t i o n a l p o l i c i e s i n s p i t e of d i m i n u t i o n of our o v e r s e a s f o o t h o l d s . T h i s we "believe to b e a worthwhile t r a n s i t i o n a l s t r a t e g y for the S i x t i e s . 7The f o r c e s p r o p o s e d h a v e b e e n d e r i v e d d i r e c t l y f r o m f o r e s e e a b l e c o m m i t m e n t s , and t h e r e i s l i t t l e or no m a r g i n o f s t r e n g t h . U n f o r e s e e n t a s k s ' can o n l y be met a t t h e e x p e n s e of our r e a d i n e s s t o m e e t s p e c i f i c o b l i g a t i o n s , e s p e c i a l l y a s we a r e l i m i t e d l o g i s t i c a l l y to one major o p e r a t i o n a t one time and c a n n o t a l w a y s know i n a d v a n c e w h a t t h e e f f e c t s o f t h e B a r r i e r w o u l d b e .
8. An u n f o r e s e e n i n c r e a s e i n e i t h e r t h e s i z e o r t h e q u a l i t y o f t h e t h r e a t a g a i n s t w h i c h we h a v e p r o v i d e d a n d e q u i p p e d f o r c e s would a t once add s i g n i f i c a n t l y to our m i l i t a r y p r o b l e m s . THE CONCEPT I N BACH THEATRE AND RESULTANT FORCE REQUIREMENTS West
of
Suez
(excluding
NATO a n d CENTO)
9. Provided footholds i n the Mediterranean are maintained, f o r c e s can he i n t r o d u c e d d i r e c t l y and q u i c k l y from t h e U.K., unimpeded by any b a r r i e r . Our f o r c e s p e r m a n e n t l y d e p l o y e d i n t h i s t h e a t r e can t h e r e f o r e be r e d u c e d w i t h o u t s u f f e r i n g an u n a c c e p t a b l e d i m i n u t i o n i n our a b i l i t y to meet our c o m m i t m e n t s , p r o v i d e d we h a v e a c a p a c i t y t o r e i n f o r c e q u i c k l y w h e n r e q u i r e d . A p a r t f r o m t h e c o n t r i b u t i o n n e e d e d t o NATO a n d CENTO p l a n s t h e l a r g e s t remaining commitment (Libya) c a l l s f o r the i n i t i a l p r o v i s i o n o f up t o a b r i g a d e g r o u p w i t h a p p r o p r i a t e n a v a l and air support. However, a s an i n t e r n a l s e c u r i t y s i t u a t i o n c o u l d a r i s e s i m u l t a n e o u s l y w i t h t h i s g r e a t e r commitment, a f u r t h e r m a j o r u n i t m u s t "be a t c a l l t o r e i n f o r c e t h e r e s i d e n t g a r r i s o n s . 10. We s e e t h e f o r c e s n e e d e d b e i n g f o u n d f r o m t h e S t r a t e g i c R e s e r v e i n the U n i t e d Kingdom, from t h e F l e e t and from t h e a i r f o r c e s b a s e d West of S u e z . The t i m e f a c t o r f o r t h e b r i g a d e group o p e r a t i o n i s to d e l i v e r t h i s f o r c e , w i t h a l l i t s equipment, complete at the scene of operations w i t h i n seven days. We w o u l d e x p e c t t o r e c e i v e a minimum o f f o u r d a y s n o t i c e f o r s u c h an operation. We c a n e x p e c t l e s s w a r n i n g f o r i n t e r n a l security r e i n f o r c e m e n t , and a c a p a b i l i t y t o f l y i n one major u n i t w i t h i n a b o u t 36 h o u r s o f r e c e i v i n g e x e c u t i v e a u t h o r i t y i s therefore required. 11. So l o n g a s we h a v e t o be a b l e t o u n d e r t a k e l a n d o p e r a t i o n s i n the Mediterranean, p a r t i c u l a r l y o p e r a t i o n s i n L i b y a . f o r which t a n k s a r e r e q u i r e d , i t w i l l b e n e c e s s a r y t o s t o c k p i l e some v e h i c l e s , s t o r e s and t a n k s i n the t h e a t r e i f t h e y a r e t o a r r i v e in the Operational Area by the time required. After detailed e x a m i n t i o n we h a v e c o m e t o t h e c o n c l u s i o n t h a t e c o n o m y i n movement r e s o u r c e s ( b o t h a i r and s e a ) c a n b e s t b e a c h i e v e d , and a d d i t i o n a l expense minimised, i f the s t o c k p i l e , e x c l u d i n g tanks which s h o u l d b e s t o c k p i l e d i n L i b y a , r e m a i n s i n C y p r u s . . - Even s o the s i z e of the p r e s e n t s t o c k p i l e t h e r e can be a p p r e c i a b l y . a n d progressively reduced. 12. Our s t a g i n g p o s t s i n L i b y a a r e n e c e s s a r y b o t h f o r t h e d i s c h a r g e of our p r e s e n t t r e a t y o b l i g a t i o n s t o t h a t c o u n t r y and a s p a r t o f our w o r l d - w i d e r e i n f o r c e m e n t r o u t e s . Libya a l s o provid.es an admirable t r a i n i n g area f o r s t r a t e g i c r e s e r v e f o r c e s . We p l a n a t p r e s e n t t o m a i n t a i n t h e r e a g a r r i s o n t o s u p p o r t t h e ' p o l i t i c a l requirements of the t r e a t y . When t h e t r e a t y i s r e v i e w e d i n 1963 we s h o u l d , t a k e t h e o p p o r t u n i t y t o n e g o t i a t e t h e c o n t i n u e d u s e o f o u r f a c i l i t i e s a t E l Adem a n d o u r o v e r f l y i n g a n d t r a i n i n g r i g h t s w i t h o u t r e t a i n i n g t h e g a r r i s o n , on t h e b a s i s o f our a b i l i t y to i n t e r v e n e r a p i d l y as a compensation f o r i t s removal. 13. Apart from s m a l l f o r c e s i n the Caribbean and minor d e t a c h m e n t s to meet such o t h e r commitments as f i s h e r y p r o t e c t i o n , the Simonstown Agreement and the West-About-Airroute t o Christmas I s l a n d , other t a s k s West of Suez c o u l d be undertaken by the F l e e t West o f S u e z , t h e S t r a t e g i c R e s e r v e and i t s a s s o c i a t e d a i r transport.
- k
1
1L . The t o t a l f o r c e s we w o u l d p r o v i d e W e s t o f S u e z , t h e U n i t e d Kingdom and Germany, a r e t h e r e f o r e
Land
Air
-
Small garrisons in Libya, Cyprus, G i b r a l t a r and t h e West I n d i e s .
outside
Malta,
-
A p a r t f r o m NATO a n d CENTO f o r c e s b a s e d i n
Cyprus, M a l t a and G i b r a l t a r , staging
f a c i l i t i e s i n t h e s e p l a c e s and i n L i b y a .
Naval -
F l e e t f o r c e s n o r m a l l y i n c l u d i n g one f l e e t
carrier, together with supporting forces
and d e t a c h m e n t s i n t h e West I n d i e s and
South A t l a n t i c . One t o t w o e s c o r t
s q u a d r o n s and some s u b m a r i n e s and
minesweepers w i l l normally be a v a i l a b l e
in the Mediterranean.
' -
CENTO F o r c e s 15" Our c o m m i t m e n t s t o CENTO i n v o l v e f o r c e s o n b o t h s i d e s o f the barrieri a i r f o r c e s b a s e d i n C y p r u s , f r i g a t e s and m i n e s w e e p e r s I n t h e M i d d l e E a s t and a c r u i s e r from t h e F a r E a s t .
MiddleEast 1 6. Land F o r c e s . We c o u n t o n t h e b a l a n c e d f o r c e p r i m a r i l y provided to counter t h e I r a q i a b i l i t y t o a t t a c k Kuwait to meet any o t h e r major commitment i n the t h e a t r e . Separate provision m u s t , h o w e v e r , be made a g a i n s t t h e p o s s i b i l i t y o f an i n t e r n a l security situation arising elsewhere; for example, in the High Commission t e r r i t o r i e s i n Southern A f r i c a , or M a u r i t i u s . A g a i n s t t h i s , and t h e p o s s i b i l i t y o f an i n t e r n a l security t a s k a r i s i n g i n Aden o r B a h r e i n a t t h e same t i m e as i n t e r v e n t i o n i n K u w a i t , p r o v i s i o n m u s t b e made f o r a t l e a s t o n e f u r t h e r m a j o r unit. This could n o r m a l l y be p r o v i d e d by r e i n f o r c e m e n t from t h e Far E a s t o r , i f n e c e s s a r y , from t h e U n i t e d Kingdom. This unit would h o w e v e r h a v e no l o c a l k n o w l e d g e o f t h e a r e a and m i g h t n o t be acclimatised. 17* Air Forces. We b e l i e v e t h e r e q u i r e m e n t s o n o u r a i r f o r c e s a t p r e s e n t b a s e d o n A d e n , B a h r e i n and. i n K e n y a w i l l t e n d t o i n c r e a s e r a t h e r t h a n d e c r e a s e , a n d we c o n s i d e r t h a t currently planned force l e v e l s are j u s t i f i e d . When w e l e a v e K e n y a t h e deployment problem at f i r s t s i g h t appears l i k e l y to e n t a i l at l e a s t t h e p r o v i s i o n o f a n o t h e r m a j o r a i r f i e l d , b u t i t may b e p o s s i b l e by e x p a n d i n g f a c i l i t i e s at Khormaksar and p r o v i d i n g some a d d i t i o n a l f a c i l i t i e s at Bahrein a n d / o r Masirah t o l i m i t building to a heliport/SR a i r f i e l d near Aden. We h a v e a l l o w e d for the l a t t e r i n our c o s t i n g , but a f i n a l f i g u r e can o n l y be d e t e r m i n e d a f t e r c o n s u l t i n g the l o c a l a u t h o r i t i e s . 18. Naval,Forces. The p l a n n e d numbers of f r i g a t e s and m i n e s w e e p e r s ( a l s o d e c l a r e d t o CENTO) w i l l b e r e q u i r e d f o r t h e Persian Gulf. Additional naval support, including naval air s u p p o r t , must b e a v a i l a b l e when r e q u i r e d from t h e F l e e t E a s t of S u e z , a n d t h e Commando S h i p w i l l a l s o r e m a i n a s s o c i a t e d w i t h t h e G u l f a s a t p r e s e n t ( s e e p a r a g r a p h 2.1 b e l o w ) . Far
East
19* Land F o r c e s . The B r i t i s h c o n t r i b u t i o n t o t h e Commonwealth B r i g a d e G r o u p , p r o v i d e d p r i m a r i l y f o r SEATO, i s e q u i v a l e n t t o two m a j o r u n i t s ; a p a r t from c e r t a i n "non-Organic" u n i t s
-
5
e n v i s a g e d i n c u r r e n t p l a n n i n g and the n e c e s s a r y i n d i v i d u a l
r e i n f o r c e m e n t s , t h e r e w i l l h e n o p l a n s t o p r o v i d e a d d i t i o n a l .'
r e i n f o r c i n g u n i t s or f o r m a t i o n s * We h a v e r e c e n t l y a p p r o v e d , in
a s e p a r a t e s t u d y , a l a n d f o r c e g a r r i s o n f o r H o n g Kongo Apart
f r o m t h e s e , a n d t a l c i n g i n t o a c c o u n t t h e EM Commando a v a i l a b i l i t y
in the t h e a t r e , f o r c e s are r e q u i r e d to cover the f o l l o w i n g
commitments: ( a )
To a s s i s t t h e G o v e r n m e n t o f G r e a t e r M a l a y s i a , during the t r a n s i t i o n a l period, in maintaining i n t e r n a l s e c u r i t y i n any of i t s territories including, possibly, anti-terrorist operations on t h e M a l a y / T h a i b o r d e r .
( b )
To a s s i s t i n t h e d e f e n c e o f C o m m o n w e a l t h t e r r i t o r i e s i n t h e IJTZAM a r e a .
( c )
The l o c a l p r o t e c t i o n ( i n c l u d i n g t h e s a f e t y o f B r i t i s h f a m i l i e s ) and t h e m a i n t e n a n c e , t o t h e e x t e n t t h a t we m a y u s e t h e m , o f t h e S i n g a p o r e B a s e and f a c i l i t i e s e l s e w h e r e i n M a l a y s i a .
( d )
Internal security reinforcement and t h e W e s t e r n P a c i f i c .
of
Hong Kong
20. We t h e r e f o r e p r o p o s e t o p r o v i d e i n G r e a t e r M a l a y s i a a f o r c e o r g a n i s e d as a b r i g a d e of two b a t t a l i o n s , a f i e l d b a t t e r y and a f i e l d squadron. We w o u l d a l s o l o c a t e t h e r e t h e n o n - o r g a n i c c o m b a t a n t u n i t s w h i c h we r e q u i r e E a s t o f t h e B a r r i e r a n d f o r which accommodation i s not a v a i l a b l e in the Arabian P e n i n s u l a . Adjustment to the above deployment w i l l e n t a i l the withdrawal of f o u r Army m a j o r u n i t s f r o m M a l a y s i a a n d o n e f r o m H o n g K o n g . 21 Naval F o r c e s . We c o n s i d e r t h e s e a s o n e e n t i t y E a s t o f t h e barrier. A p a r t f r o m t h e d e c l a r a t i o n o f a c r u i s e r t o CENTO, f i x e d c o m m i t m e n t s e x i s t t o SEATO a n d C o m m o n w e a l t h p l a n s , A redeployment w i l l be n e c e s s a r y from West of S u e z , w i t h a c o n s e q u e n t r e d u c t i o n i n C a t e g o r y A N./..T0 f o r c e s ; although a small increase in escorts i n c o m m i s s i o n and i n a f l o a t s u p p o r t o v e r p r e s e n t p l a n s f o r t h e Navy as a w h o l e w o u l d , b e n e c e s s a r y . N o r m a l l y , two a i r c r a f t carriers with a nuclear c a p a b i l i t y (the second deployed at the expense of t h e F l e e t West of S u e z ) , w i l l be t h e main s u r f a c e u n i t s . In a d d i t i o n , a f u l l y e f f e c t i v e A m p h i b i o u s Group w i l l b e p r o v i d e d . We c o n s i d e r t h i s j u s t i f i e d n o t o n l y f o r t a s k s i n t h e M i d d l e E a s t ( i n c l u d i n g t h e p r o v i s i o n o f an a m p h i b i o u s c a p a b i l i t y i n " t h e P e r s i a n Gulf - see p a r a g r a p h 18 above) and our amphibious commitment t o SEATO b u t a l s o t o p r o v i d e o u r f o r c e s w i t h a b e a c h / V T O L l a n d i n g c a p a c i t y E a s t o f Suez and t o g i v e u s a d e g r e e o f m i l i t a r y p r e s e n c e i n a r e a s w h e r e we h a v e , o r s h a l l h a v e , n o g a r r i s o n s . 22. To m e e t t h e c o m m i t m e n t f o r t a n k s t o b e p e r m a n e n t l y p o i s e d at sea f o r Kuwait, a s e c o n d A s s a u l t Ship must be c o m m i s s i o n e d . T h i s we s e e b e i n g b a s e d o n S i n g a p o r e . Similarly, to maintain o n e Commando S h i p c o n s t a n t l y a v a i l a b l e , h a v i n g r e g a r d t o t h e age of t h e s e s h i p s and t h e p o s s i b i l i t y o f a c c i d e n t o r b r e a k d o w n , we p r o p o s e t h a t t h e s e c o n d Commando S h i p s h o r t l y t o b e c o m m i s s i o n e d s h o u l d n o r m a l l y be b a s e d and r e f i t t e d i n t h e P a r E a s t . Their h e l i c o p t e r squadrons are counted towards the permanently a v a i l a b l e l i f t East of Suez. 23. To m a i n t a i n . t h e r e q u i r e d e m b a r k e d Commando t r a i n e d a n d e f f i c i e n t a second, i s n e e d e d , r o t a t i o n o c c u r r i n g e v e r y two months under normal c i r c u m s t a n c e s . We h a v e c o n s i d e r e d w h e t h e r t h e e x c h a n g e c o u l d n o t be done b y a i r from t h e U n i t e d Kingdom b u t have c o n c l u d e d t h a t t o a v o i d l o s s o f a v a i l a b i l i t y and -
6
TOP SECRET
126
problems a r i s i n g from a c c l i m a t i s a t i o n , t r a i n i n g considerations and d i s t u r b a n c e , t h e s e c o n d u n i t s h o u l d b e l o c a t e d i n S i n g a p o r e To o p e r a t e a n d t r a i n w i t h t h e s e c o n d Commando S h i p a t h i r d Commando w i l l a t t i m e s b e r e q u i r e d , w h i c h c o u l d p e r h a p s b e b a s e d i n t h e U n i t e d Kingdom and f l o w n o u t and b a c k a s n e c e s s a r y ; and we h a v e c o s t e d o n t h i s a s s u m p t i o n . While so long as shore support can be m a i n t a i n e d i n S i n g a p o r e no a i r c r a f t support s h i p n e e d be p r o v i d e d i n the t h e a t r e . 2k' Air Forces. The f o r c e l e v e l s a r e d e r i v e d from t h e f o r e s e e n s p e c i f i c o p e r a t i o n s t a s k s r a t h e r than by d i r e c t r e f e r e n c e t o the p o t e n t i a l a i r t h r e a t s , a l t h o u g h t h e s e are' c o n s i d e r a b l e and g r o w i n g . They are t o c o n t r i b u t e t o t h e A l l i e d n u c l e a r d e t e r r e n t t o C h i n a , t o s u p p o r t SEATO o p e r a t i o n s a n d t o d e f e n d U n i t e d K i n g d o m a n d Commonwealth i n t e r e s t s . The c a p a c i t y o f t r a n s p o r t s u p p o r t f o r c e s i s a t p r e s e n t b e l o w t h e a g r e e d l e v e l s , and i s due t o be e x p a n d e d f o r MRT a n d VTOL a i r c r a f t . Similarly missile air defence not yet d e p l o y e d , i s d u e t o b e b u i l t u p t o t h r e e SAM s q u a d r o n s . It i s i n o u r v i e w e s s e n t i a l t h a t t h e p l a n n e d e x p a n s i o n o f MRT a i r c r a f t , a n d VTOL a i r c r a f t t o o n e - c o m p a n y l i f t , s h o u l d b e c o m p l e t e d , p a r t i c u l a r l y a s t h e MRT t r a n s p o r t r e s o u r c e s i n t h i s t h e a t r e a n d i n the Middle East w i l l even then only p r o v i d e the c a p a c i t y f o r one p a r a c h u t e b a t t a l i o n a s s a u l t i n t h e w h o l e a r e a E a s t of S u e z , So f a r a s t h e a i r d e f e n c e f o r c e s a r e c o n c e r n e d we a c c e p t t h e r i s k s e n t a i l e d i n t h e i r r e d u c t i o n , b y one m i s s i l e s q u a d r o n , t o t h e m i n i m u m a c c e p t a b l e o f o n e AWF a n d o n e m i s s i l e s q u a d r o n i n e a c h o f t h e two a i r d e f e n c e a r e a s . 25*
Total force
requirements
East
of
Suez
therefore
Land
-
Two b r i g a d e g r o u p s ( o n e i n A d e n a n d a r e d u c e d one i n S o u t h E a s t A s i a ) , p l u s our c o n t r i b u t i o n t o t h e Commonwealth Brigade ( 2 u n i t s ) and a p p r o p r i a t e n o n organic combatant supporting u n i t s stationed in Malaysia for operations in the general area East of Suez. In a d d i t i o n a g a r r i s o n o f 6-g m a j o r u n i t s i s p l a n n e d f o r Hong Kong, a p a r t from e s s e n t i a l Gurkha e n g i n e e r s u p p o r t .
Air
-
A i r d e f e n c e , d i r e c t s u p p o r t , s t r i k e and r e c o n n a i s s a n c e f o r c e s , , and t r a n s p o r t l i f t f o r one p a r a c h u t e b a t t a l i o n g r o u p , b a s e d i n Aden, t h e P e r s i a n G u l f and South East A s i a .
Naval
Facilities
ares-
S
F l e e t f o r c e s b a s e d m a i n l y on S i n g a p o r e , . n o r m a l l y i n c l u d i n g two f l e e t carriers,, t o g e t h e r w i t h a Commando S h i p a n d a n Assault Ship f u l l y operational, a p p r o p r i a t e e s c o r t s and a f l o a t support, and s u b m a r i n e s and m i n e s w e e p e r s . The s e c o n d Gomrnando S h i p a n d A s s a u l t S h i p , , provided primarily for backing, will a l s o b e a v a i l a b l e much of t h e t i m e .
Required
in Greater
Malaysia
26, The p r o p o s e d d e p l o y m e n t a n d f o r c e r e q u i r e m e n t s i n t h e F a r East depend on our m a i n t a i n i n g s p e c i f i c f a c i l i t i e s i n the t h e a t r e when G r e a t e r M a l a y s i a comes a b o u t .
-
7
Strategic
Reinforcement
from
the United
27. We p r o p o s e l o c a t i n g t h e f o l l o w i n g Kingdom f o r r e i n f o r c e m e n t : -
Kingdom forces
in the
United
Land
-
One p a r a c h u t e b r i g a d e g r o u p , p l u s u p t o
two a d d i t i o n a l b r i g a d e g r o u p s w h i c h
would have t h e dual r o l e of r e i n f o r s i n g
BAOR a n d l i m i t e d w a r o p e r a t i o n s ( s e e
para 28 b e l o w ) .
Air
-
S t r a t e g i c and medium-range squadrons t o l i f t and s u p p o r t a b r i g a d e g r o u p a t l i g h t scales and t o d r o p o n e p a r a c h u t e b a t t a l i o n g r o u p . Squadrons h e l d f o r r e i n f o r c e m e n t i n the U n i t e d Kingdom and Germany f o r a l l w e a t h e r f i g h t e r , ground a t t a c k , s t r i k e and reconnaissance roles.
These f o r c e s a r e i n a d d i t i o n t o t h e t r a i n i n g and o t h e r and e s t a b l i s h m e n t s o f t h e t h r e e S e r v i c e s i n t h e U n i t e d
units Kingdom,
NATO F o r c e s We h a v e , a s d i r e c t e d , w o r k e d o n t h e a s s u m p t i o n 28o Land, F o r c e s . t h a t two d i v i s i o n s w o u l d b e s t a t i o n e d i n Germany and two i n t h e U n i t e d Kingdom, b o t h t h e l a t t e r a l s o b e i n g a v a i l a b l e i f n e c e s s a r y as p o t e n t i a l r e i n f o r c e m e n t f o r l i m i t e d war o v e r s e a s . On t h i s a s s u m p t i o n , t o m i n i m i z e e x p e n d i t u r e o n e q u i p m e n t we a l l o w e d f o r o n l y o n e o f t h e U n i t e d K i n g d o m - b a s e d d i v i s i o n (C D i v i s i o n ) b e i n g h e l d a s a n i m m e d i a t e r e i n f o r c e m e n t f o r BAOR a s i t w o u l d n e e d a s t o c k p i l e o f BAOR-type h e a v y e q u i p m e n t i n Germany and a d u p l i c a t e s e t o f t h i s equipment w i t h i t f o r e s s e n t i a l t r a i n i n g i n t h e U n i t e d Kingd.om. We s a w t h e s e c o n d d i v i s i o n i n t h e U n i t e d K i n g d o m ( D D i v i s i o n ) , a l t h o u g h a l s o a s s i g n e d t o NATO, a s b e i n g o r g a n i s e d a n d e q u i p p e d f o r s l o w e r m o v e m e n t t o BAOR a n d a s a r e s e r v e f o r overseas reinforcement. 29. However, even m o d i f i e d i n t h i s way, the c o s t of implementing t h e p r o p o s a l i s l i k e l y to r e s u l t i n s u c h h e a v y e x p e n d i t u r e t h a t we n o w s u g g e s t t h a t i t s h o u l d b e r e c o n s i d e r e d . Q
Naval F o r c e s . This deployment p l a n would r e s u l t , i n a 3 * s h o r t f a l l i n t h e 1 9 6 6 NATO C a t e g o r y A r e q u i r e m e n t s o f 1 - a i r c r a f t c a r r i e r , 2 a n t i - s u b m a r i n e c a r r i e r s , 1 c r u i s e r , 32 d e s t r o y e r s o r f r i g a t e s , 1 submarine, o t h e r a d d i t i o n a l minor c r a f t and a t t i m e s an a d d i t i o n a l a i r c r a f t carrier, 31. j^r Forcer^ Two a l l w e a t h e r f i g h t e r s , o n e d a y f i g h t e r , f i v e f i g h t e r / t a c t i c a l r e c o n n a i s s a n c e and f o u r l i g h t bomber squadrons a r e a t p r e s e n t b a s e d i n Germany. The two a l l w e a t h e r f i g h t e r and d a y f i g h t e r s q u a d r o n s a r c due t o be w i t h d r a w n and disbanded i n 1962j t h e r e a f t e r any f i g h t e r , as w e l l as t r a n s p o r t , r e q u i r e m e n t s a r i s i n g i n Germany w i l l b e met from t h e U n i t e d Kingdom. A f u r t h e r commitment i s t h e a s s i g n m e n t i n n u c l e a r s u p p o r t o f NATO o f t h r e e V - b o m b e r s q u a d r o n s ( V a l i a n t s ) b a s e d i n t h e U n i t e d Kingdom. I n a d d i t i o n we p l a n t o p r o v i d e a t w o c o m p a n y VTOL l i f t f o r t h e U n i t e d K i n g d o m a n d BAOR, o f w h i c h a t l e a s t a p a r t w i l l be b a s e d i n Germany. The t o t a l s h o r t f a l l o f a i r f o r c e s a g a i n s t NATO 1 9 6 6 f o r c e g o a l s w i l l t h e n b e : 36 k 16 33
AWF a i r c r a f t SAM u n i t s reconnaissance LRMR a i r c r a f t . -
8
aircraft
32. We h a v e a s s u m e d t h a t w e s h a l l c o n t i n u e t h r o u g h o u t , t h e S i x t i e s to maintain our c o n t r i b u t i o n to the s t r a t e g i c n u c l e a r d e t e r r e n t o f t h e West a t t h e l e v e l o f e x p e n d i t u r e now p l a n n e d , p e n d i n g r e v i e w i n 1 9 6 2 w h e n t h e f u t u r e o f SKYBOLT s h o u l d b e more p r e c i s e l y known. IMPLICATIONS OH THE SERVICES 33* The B r i t i s h A r m y . A l t h o u g h c u r r e n t p l a n s f o r t h e d e v e l o p m e n t o f b o t h t h e R o y a l N a v y a n d t h e RAF w i l l b e c o n s i d e r a b l y affected b y t h e a d o p t i o n o f t h i s s t r a t e g y i t i s o n t h e Army t h a t t h e g r e a t e s t e f f e c t w i l l be f e l t . The r e d u c t i o n i n h e r e n t i n t h e s t r a t e g i c d e p l o y m e n t we p r o p o s e , o f t h e o r d e r o f s o m e 12 m a j o r u n i t s , would i n e v i t a b l y i n v o l v e a c o n s i d e r a b l e measure of r e - o r g a n i s a t i o n . Further considerable reductions would f o l l o w in h e a d q u a r t e r s s t a f f s and a d m i n i s t r a t i v e u n i t s from t h e new deployment and from c h a n g e s i n t h e r o l e o f our o v e r s e a s f o r c e s ; these w i l l give r i s e to redundancy with i t s a s s o c i a t e d very s u b s t a n t i a l compensatory payments f o r which our c o s t i n g s have n o t a l l o w e d and t o r e a l p r o b l e m s i n t h e f i e l d of c a r e e r s t r u c t u r e , , 3Uo Gurkhas. The r e d u c t i o n i n t h e s i z e o f t h e Army, coupled with the p o l i t i c a l c o n s i d e r a t i o n which have i n h i b i t e d us In the employment o f Gurkha t r o o p s , b r i n g s t h e f u t u r e of Gurkha u n i t s i n a s m a l l e r B r i t i s h Army i n t o q u e s t i o n . 35* Royal Malta A r t i l l e r y . Under e x i s t i n g p l a n s one r e g i m e n t of the Royal Malta A r t i l l e r y i s l o c a t e d In Malta. The o t h e r r e g i m e n t RMA, a t p r e s e n t i n M a l t a , i s p l a n n e d t o g o t o BAOR a s a t r a n s p o r t u n i t i n t h e s h o r t term and t h e r e a f t e r t o b e d i s b a n d e d . Under o u r n e w s t r a t e g y we e n v i s a g e t h e r e b e i n g o n l y o n e u n i t i n M a l t a , for internal security purposes. This, we consider, should be a United K i n g d o m b a t t a l i o n , a n d t h e r e m a i n i n g RMA. Surplus to the r e q u i r e m e n t s t o p r o v i d e a t r a n s p o r t u n i t i n BAOR i n t h e s h o r t t e r m and t h e b a c k i n g i n M a l t a s h o u l d b e d i s p o s e d of. 36. The included backing studies, infantry achieve
Royal Marines. I n o u r p r o p o s e d d e p l o y m e n t we h a v e t h e f i v e R o y a l M a r i n e Commandos and h a v e r e t a i n e d t h e i r i n the U n i t e d Kingdom. If, as a r e s u l t of current a h i g h d e g r e e o f i n t e r - c h a n g e a b i l i t y comes a b o u t b e t w e e n b a t t a l i o n s a n d RM C o m m a n d o s , i t s h o u l d b e p o s s i b l e t o some r e d u c t i o n o v e r a l l . T H E , S I X T I E S AS A PERIOD OF TR,^NSITION.
37* We m u s t f i n a l l y s t r e s s o n c e a g a i n t h a t t h i s s t r a t e g y a s s u m e s the a v a i l a b i l i t y o f f a c i l i t i e s i n t h e A r a b i a n P e n i n s u l a and Singapore u n t i l 1970. F o r f i n a n c i a l r e a s o n s we h a v e n o t b e e n a b l e t o recommend t h e p r o v i s i o n d u r i n g t h e S i x t i e s o f alternative f a c i l i t i e s , including additional seaborne f o r c e s , strategic t r a n s p o r t a i r c r a f t and b a s e s i n A u s t r a l i a . I f for any reason p o l i t i c a l developments i n e i t h e r of these p l a c e s compel us to withdraw b e f o r e the m i d d l e - S e v e n t i e s the l a c k of t h e s e alternative f a c i l i t i e s w i l l g r e a t l y c o m p l i c a t e , a n d make f o r considerable delay i n , the meetings of our l i k e l y r e s i d u a l commitments'until they are p r o v i d e d . In p a r t i c u l a r , ' i n view of the time i t takes to b u i l d s h i p s a n d t o p r o c u r e a i r c r a f t ( p a r t i c u l a r l y VC 1 0 ' s ) and t h e e s s e n t i a l p a r t p l a y e d b y S i n g a p o r e i n an i n t e r i m s t r a t e g y , the e f f e c t of the premature l o s s of the f a c i l i t i e s t h e r e would be particularly crippling.
SERVICE R E S P O N S I B I L I T I E S AND HIGHER DIRECTION AFTER T H E " T l X T I E S ' . 38. Having c o n s i d e r e d g e n e r a l t r e n d s , i n c l u d i n g the d e v e l o p i n g u s e o f s p a c e f o r m i l i t a r y p u r p o s e s , we " b e l i e v e t h a t i n t h e f u t u r e we s h o u l d c o m e t o l o o k o n s e a , l a n d a n d a i r f o r c e s , not i n terms of u n i t s p r o v i d e d by a p a r t i c u l a r S e r v i c e , hut i n terms of a p p l y i n g complementary power from t h e t h r e e e l e m e n t s . T h e c o n d i t i o n s we f o r e s e e w i l l more t h a n e v e r e m p h a s i s e t h e j o i n t n a t u r e o f o p e r a t i o n s f o r meeting our commitments s h o r t of g l o b a l war. It is possible t h a t an e x t e n s i o n o f t h i s t r e n d , so t h a t e v e n t u a l l y e a c h o f the three S e r v i c e s operated a l l the u n i t s designed to f i g h t in o r o n i t s own e l e m e n t m a y b e n e c e s s a r y t o a c h i e v e m a x i m u m f l e x i b i l i t y and e f f i c i e n c y w i t h economy i n t h e c o n d i t i o n s o f the future. We a r e a r r a n g i n g f o r t h i s q u e s t i o n t o b e s t u d i e d . 39. We s e e n c r e a s o n w h y t h e s a m e p r i n c i p l e s h o u l d n o t a p p l y t o Command, w h i c h c a n n o t b u t b e i m p r o v e d b y t h e r e m o v a l of a m b i g u i t i e s and t h e e l i m i n a t i o n o f o v e r l a p p i n g responsibilities. We s e e , h o w e v e r , n o c h a n g e r e q u i r e d i n t h e p r i n c i p l e o f n a v a l command a t s e a o r a r m y o r a i r c o m m a n d of shore-based o p e r a t i o n s , according t o the S e r v i c e whose role predominates. U n d e r t h e c o n t r o l o f a U n i f i e d C-in--C and o b s e r v i n g t h e n o r m a l p r a c t i c e o f T a s k Commanders f o r o p e r a t i o n s where t h e r e i s no s h i f t o f e m p h a s i s s o s u b s t a n t i a l a s t o r e q u i r e a c h a n g e - o v e r o f command f r o m o n e S e r v i c e t o a n o t h e r , we f o r e s e e n o c o m m a n d o b s t a c l e t o c h a n g e s w h i c h might be found d e s i r a b l e f o r the r e a s o n s g i v e n above. AO. There w i l l i n e v i t a b l y be r e f l e c t e d changes i n h i g h e r d i r e c t i o n and S e r v i c e a d m i n i s t r a t i o n i n t h e U n i t e d Kingdom f r o m t h e s t r a t e g y we h a v e p r o p o s e d . The S e r v i c e s w i l l h a v e t o g r o w t o g e t h e r a t home i f s o l a r g e a p a r t o f t h e i r e f f o r t o v e r s e a s i s t o b e a s w e l l c o - o r d i n a t e d and l e d a s We f o r e s e e i t c a n a n d m u s t b e , a n d i f o p e r a t i o n a l a n d equipment r e q u i r e m e n t s are t o be p r o p e r l y f o r m u l a t e d .
- 10
Printed for the Cabinet.
February 1962
Copy N o .
C. ( 6 2 ) 2 5 9th February, 1962
5H
CABINET
LIGHT CARGO AIRCRAFT MEMORANDUM BY THE MINISTER OF D E F E N C E AND THE MINISTER O F AVIATION
At a meeting of the Defence Committee on 19th December, 1961, we were invited to prepare a joint memorandum on the choice of light cargo aircraft to meet a military requirement, so that the Cabinet could make the final decision. At that time, the choice appeared to be between the Herald and the Caribou. Since then another competitor has appeared, and made possible an agreed solution to the problem. The Military Requirement 2. New light cargo aircraft are required to provide support in war for forces operating in the field. T h e aircraft are also needed in peacetime to replace the Valetta for general use. 3. In the long term aircraft capable of vertical take-off and landing are required for this purpose, but for the next 10 years or so the Rotodyne will be the only available aircraft which could lift heavy loads vertically. T h e question of a military order for the Rotodyne is being considered separately, but whatever the outcome a large part of the requirement must be met by fixed wing aircraft capable of taking off and landing in a short distance (STOL). The Choice of STOL Aircraft 4. The choice now rests between three aircraft: (a) The Caribou, manufactured b y the D e Havilland Company of Canada, a wholly owned subsidiary of t h e Hawker Siddeley Group. (b) A modified version of the "Hand ley Page Herald. (c) a modified version of the Hawker Siddeley Group\s Avro 748, known as the Avro 748/MF. (The Group had previously.submitted other designs which were ruled out as too expensive and too late in delivery.) 5. The following table compares the estimated delivery dates and initial cost of the three aircraft. The estimates are derived from quotations by Che firms-based on a fairly well-defined military requirement. The prices eventually paid would of course be determined by contract negotiations.
Caribou Herald Avro 748/MF Notes:
Full clearance for service use (months from date,of contract) 15 33 36
Number required
Order completed (months from date of , contract)
Cost per aircraft
Total cost of fleet
48*
34
£ million 10-12
31 M
39 39
£ 210*000250,000 360;000f
45,0iP00t
11-2 'i 14
* 5f-we decideto forgo the heavy vertical ;lift capacity which can be provided.only by the Rotodyne, an additional si 5 Caribous (costing s qme £-/ million) -would rbetregiiirpcUibirt $to (increase i n the number * * . " . . * : ' of Heralds or Ayro .748/MFs-syQuldbe-neGes^ary. t i he cost estimates for the Herald a n d the Avro 748/MF are based on the use. p f the Dart 12 engine; the.,cost,.of each would be reduced by £15,000-£20,600if Dart 10'engines were used. The Ministry of Aviation would, however, recommend the use of D a r t 12 engines i n iboth cases. :
60395
Operational and Financial Comparison 6. The only military advantage of the Caribou is that it could be in service earlier than the others. While capable of meeting the limited war requirement, its performance is inferior to that of the Herald and the Avro, and, if the Rotodyne is not bought, a Caribou force would cost more than either of the others. 7. The Herald and the Avro, though later in service, would both be superior in performance to the Caribou. Of the two British types, the Herald would be marginally superior in performance to the Avro in some respects in which the aircraft differ (see Annexes A and B), but there is no decisive difference in performance between the two aircraft. The Herald, by virtue of its high wing, is likely to be better suited to the tactical operation for which it is needed. On the other hand, the Air Registration Board have so far declined to declare the Herald a " fail safe " structure, though testing is continuing. Tests carried out so far on the Avro 748 indicate, in the opinion of the Ministry of Aviation, that the 748 structure is superior and that the aircraft will demonstrate satisfactory fail safe characteristics. This should mean that it will be cheaper to maintain. The present forecast delivery dates for both aircraft are about the same. 8. On the estimates given in paragraph 5 above, the initial cost to the Defence Budget of an x\vro force would be £2 - 8 million more than that of a Herald force, but it is expected that the cost of the Avro 748IMF will be reduced by £20,000 per aircraft (a total of £620,000). This would make an Avro force £2-2 million more expensive than a Herald force. There are a number of other factors that could substantially affect the cost to the defence budget of choosing one aircraft rather than the other. It is not possible to quantify any of these factors, but in total they would tend to reduce the difference in cost of choosing the Avro rather than the Herald, and might even result in the Avro being the less expensive choice.
Political and Industrial Factors Affecting the Choice 9. There are the following objections to the choice of the Handley Page Herald: (a) The aircraft industry must be successfully rationalised if it is to become viable, and be capable of meeting future defence needs, as well as contributing towards exports and the technological advance of the engineering industries. (b) T o encourage reorganisation assurances were given and made public that future Government orders would be concentrated upon the main groups in the industry, except where specialised requirements or public policy made it necessary to do otherwise. In this context, the aircraft industry was given to understand that " specialised requirements " meant equipment (whether electronic or aeronautical) and light aeroplanes, and that " public policy " related only to placing orders in Northern Ireland and to questions of interdependence. (c) On this basis, the reorganisation into five major groups took place at considerable expense to some companies, particularly the Hawker Siddeley Group. T o give this large new order to a firm outside the main groups would be a violation of our pledges, and a contradiction of Government policy. (d) T h e effect of such action would be particularly serious in view of the present uncertainty about new projects to be placed with the major groups. A serious decline on the design side is already starting in the two airframe groups. Hawker Siddeley's situation in the absence of further orders would soon become critical. (e) Since the placing of the order for the TSR-2 with the British Aircraft Corporation no substantial new requirement for military aircraft (apart from the five VC-lOs, also with the British Aircraft Corporation) has been authorised, and in present financial circumstances there is great reluctance on the part of the Chancellor of the Exchequer to approve the starting of new projects. This makes it all the more important that Government purchases should be made in accordance with the pledges.
(/) It is necessary to consider possible repercussions in India. The Indians were persuaded to adopt a British aircraft to replace their military Dakotas, largely on the strength of an assurance by the, Prime Minister to the Prime Minister of India that the British aircraft of their choice (they subsequently chose the Avro 748) would also be purchased by Her Majesty's Government for regular service by a United Kingdom operator. In the autumn of 1959, Her Majesty's Government were on the point of concluding negotiations for the purchase of three Avro 748s for use by a subsidiary of the British Overseas Airways Corporation. This deal fell through at the last moment because Hawker Siddeleys repudiated the terms previously agreed with the then Ministry of Supply (which were similar to the terms on which three Heralds had been bought). Subsequently Aden Airways (a subsidiary of the British Overseas Airways Corporation) placed an order for three Avro 748s. It is possible that this order may not now mature. In any event, the Minister of Aviation would not regard this order as fulfilling the Prime Minister^ undertaking to the Indians. 10. If the Caribou were ordered the United Kingdom would not have the direct benefit of the design and production work, but the following advantages would be obtained: (a) The Canadians have offered, if the Caribou is bought, to negotiate a barter deal so as to match the value of our order with purchases which would not otherwise have been made in this country so that no adverse dollar balance would fall on the United Kingdom. These would include, inter alia : (i) The purchase of three Comets for the Royal Canadian Air Force (this order would be particularly welcome to Hawker Siddeley since they have some unsold Comets on their hands). (ii) Reciprocal purchases of this kind would be a practical demonstration of the value of interdependence. (iii) There are at present several unresolved political issues between us and the Canadians, e.g., over the Common Market negotiations. The High Commissioner has advised that the proposed purchase of Caribous would go far to convince the Canadians of our willingness to meet them half way, and would stand us in good stead in our dealings with the Canadians on wider issues. 11. The choice of either the Caribou or the Avro 748 would accord with our policy and considerably ease the position of the Hawker Siddeley Group. It would also mean that the project was entrusted to a major group with a long-term future in the industry. W e would be assured, therefore, that the project would be carried through satisfactorily to its conclusion, and that any follow-on orders, or further developments would be satisfactorily handled. There could be no such assurance regarding the Herald. Equally the future support of the Victor programme depends on Handley Page being taken over by one of the major groups—and this would not be assisted by a Herald order. Recommendation 12. For the reasons given in paragraph 8 we consider that the financial considerations are not decisive. In view of the Governments declared policy towards the aviation industry we therefore recommend that the Avro 748 / M F should be ordered. The Ministry of Aviation in their negotiations with the firm will naturally take all possible steps to ensure that the most favourable terms are obtained. H. W. P. T. 9th February,
1962.
I I.
ANNEX A LIGHT CARGO A I R C R A F T - M I N I S T R Y O F AVIATION ASSESSMENTS ( M i n i s t r y of A v i a t i o n w e i g h t s a n d p e r f o r m a n c e t h r o u g h o u t ) Requiremerit *ry Range lyload for 750 n a u t i c a l m i l e s s t a g e lyload for 165 n a u t i c a l m i l e s r a d i u s of lotion at weight l i m i t e d by 1, 500 ft. Lke-off ^Ice-off d i s t a n c e ( I n t e r n a t i o n a l S t a n d a r d jLmosphere (ISA) -f 2 0 ^ ) f o r N o r m a l lortie (safe civil) a t m a x i m u m a 11 up weight (AUW) fght for 1, 500 ft. S T C L t a k e - o f f a t 1,000 ft. "above s e a l e v e l (ASL) jEA * 2 0 C . like-off d i s t a n c e a t w e i g h t f o r 1,000 l b s . p a y l o a d uplift priding d i s t a n c e f o r n o r m a l s o r t i e A -f 2 0 C . tiding d i s t a n c e f o r S T C L s o r t i e 1,000 ft. A S L ISA -f 2 0 C (9(b)) lading d i s t a n c e with 7 , 0 0 0 l b s . p a y load (STOL t e c h n i q u e ) luising s p e e d ( t r u e a i r s p e e d ) l i m u m payload ' axirnum a l l - u p w e i g h t I L AUW with 7, 000 l b s . p a y l o a d o
o
o
* nautical m i l e s .
MILITARY HERALD D a r t 1011 E n g i n e s
2, 700 n . m . * 2 , 830 ( J i t t e r ) 10, 000 l b s . 10, 610 ( J i t t e r )
AVRO 7 4 8 / M F I Dart 12 Engine;
2 , 700 9,220
7, 000 l b s .
4,500
4, 500 ft.
3, 520 ( E e t t e r )
3 , 740
3 6 , 400 ( B e t t e r )
37,700
1, 500 ft..
1, 740 ( W o r s e )
1, 650
3, 000 ft.
2,400 (Worse)
2 , 360
1, 500 ft.
1, 225 ( B e t t e r )
1, 520
1, 320 ( B e t t e r ) 230 1 1 , 910 ( B e t t e r ) 46,000 3 8 , 900
1, 600 230 11,220 46,286 39,564
-
1, 500 ft. 200 k n o t s 12, 00 0 l b s .
(Worse)
5,140
I el
i
ANNEX B LT^HTjGARGO A I R C R A F T - M I N I S T R Y O F AVIATION ASSESSMENTS ( M i n i s t r y of A v i a t i o n w e i g h t s a n d p e r f o r m a n c e t h r o u g h o u t )
Re^ruire^ ment 2,700 n . m . * r r y R.ange 10, 000 l b s . ilrload for 750 n a u t i c a l m i l e s s t a g e lyload for 165 n a u t i c a l m i l e s r a d i u s of action a t w e i g h t l i m i t e d by 1, 500 ft. 7, 000 l b s . like-off lie-off d i s t a n c e (ISA + 2 0 C ) f o r Jformal S o r t i e (safe civil) a t m a x i 4 , 500 ft. mum AUW' light for 1, 500 ft. S T O L t a k e - o f f ft 4, 000 ft. A S L - ISA 4- 2 0 ^ 3 jike - off d i s t a n c e a t w e i g h t f o r 7, 000 l b s . 1, 500 ft. Jfayload uplift Siding d i s t a n c e f o r n o r m a l s o r t i e 3, 000 f t . I A * 20 C Ending d i s t a n c e f o r S T Q L s o r t i e l o 1, 500 ft. ft. A S L ISA 4- 20 C (9 (b)) distance with 7,000 l b s . p a y 1, 500 ft. load (STOL t e c h n i q u e ) 200 k n o t s fising s p e e d ( t r u e a i r s p e e d ) 12, 000 l b s . iximum p a y l o a d l i m u m all-up w e i g h t I I AUW with 7, 000 l b s . p a y l o a d
M I L I T A R Y H E R A L D AVRO 7 4 8 / M F 2litJ2 Engine3 D a r t 12 Engine. m
2, 830 ( B e t t e r ) 10, 610 ( B e t t e r )
2 , 700 9, 220
5, 500 ( B e t t e r )
5, 140
3, 320 ( B e t t e r )
3, 740
37,400 (Better)
37, 700
1, 630 ( B e t t e r )
1, 650
o
o
4000 lading
*
nautical miles
2,400 (Worse)
2, 360
1, 275 ( B e t t e r )
1, 520
1, 335 ( B e t t e r ) 230 11, 910 ( B e t t e r ) 46,000 38,900
1, 600 230 11,220 46,286 39,564
Printed for the Cabinet.
C. (62) 26 9 th February,
February
1962
Copy N o .
50
1962. CABINET
H O M E D E F E N C E : DISPERSAL POLICY MEMORANDUM BY THE SECRETARY OF STATE FOR THE H O M E DEPARTMENT, THE SECRETARY OF STATE FOR SCOTLAND AND THE MINISTER OF H O U S I N G AND LOCAL GOVERNMENT AND M I N I S T E R FOR W E L S H AFFAIRS
Following a report by officials of their review of Home Defence Policy in 1960, the Cabinet asked the Defence Committee to discuss dispersal policy. T h e Defence Committee agreed that the local authority associations should be consulted. This was done, and at a meeting of the Defence Committee on 1st February, 1962, it was agreed that the matter should be considered by the Cabinet. 2. The issue now is whether a dispersal scheme should be prepared. Its preparation would not commit the Government to the view that dispersal must be ordered in an emergency. N o one can foresee whether conditions at the time would permit this to be done. But the Government of the day would not even have the choice of whether or not to order dispersal if no scheme had been planned in advance. Consultations with the Local Authority Associations 3. T h e consultations showed that the associations in England and Wales were strongly in favour of including in civil defence planning the preparation of a dispersal scheme. They were told that only the western half of the country and a small part of south-east England could be regarded as suitable for reception purposes, and they said that intensive use should be made of these areas. Simultaneous consultations in Scotland showed similar strong support by local authority associations for a planned dispersal scheme. 4. In the light of the associations' view a revised outline scheme has been prepared for England and Wales providing for the dispersal of 9J million people in the priority classes (i.e., children accompanied by mothers or other responsible persons, and other children Under the age of 18; expectant mothers; people who are blind, crippled or aged and infirm, and who are dependent on the care of a person who is a member of the priority classes) from 19 different centres. It is illustrated in the accompanying map. In Scotland the scheme will provide for dispersing about one million people from Clydeside and Edinburgh. The Next Steps 5. The first step would be for the Government to make an announcement. This could be quite brief; it would be sufficient to say: " The Government have reviewed dispersal policy in the light of developments in the strategic situation over recent years, and have had consultations with the local authority associations. They have concluded that although the circumstances that might precede an attack upon us cannot be foreseen, it is necessary to have available a scheme which could be implemented, if it were thought right to do so, for dispersing mothers and children and other people in ' priority classes ' from major centres of population. The detailed application of the scheme will be worked out with the help of local authorities." The Defence White Paper, which will shortly be published, would provide an opportunity to make such an announcement. 60394
6. Shortly after the announcement all local authorities would be told the broad outline of the scheme, including their individual classification [i.e., dispersal, neutral or reception), and particulars of the priority classes. They would also be told that the local authority associations were to be consulted about the detailed planning. It would be emphasised that the scheme was to be prepared only so that it woufd be available if required, and not on the basis that it would inevitably be carried out iff jjTn emergency. 7. It would thus become known which parts of the country were dispersal, neutral and reception areas, but it is understood that the Air Ministry would see no objection to this on security grounds. It would not be necessary to disclose any information relating to secret strategic assessments forming the basis of home defence planning. 8. After local authorities had been informed as in paragraph 6, a draft memorandum about detailed planning would be sent to the associations for comment. Broadly the proposals in the memorandum would be as follows: (a) Planning of main journeys by rail or bus from dispersal areas to reception areas would be undertaken by the transport authorities in consultation with the Ministry of Transport. (b) In dispersal areas local authorities would make plans for the assembly and departure of people in the priority classes, including those travelling by private transport. (c) In reception areas local authorities would plan billeting. (d) The police would be kept in touch with all stages of planning. 9. After the associations had discussed the proposals, a final version of the memorandum would be issued to local authorities so that detailed planning of the scheme could start. N o basic information about the scheme additional to that referred to in paragraph 6 would need to be given at this or any later stage. Conclusion 10. As a Government we cannot take the easy course of remaining silent indefinitely. It is almost three years since the Commons were told that we were reviewing dispersal policy. And the local authorities will expect soon to know the outcome of the consultations with them last July. 11. The only reasonable alternative to preparing a scheme is to announce the abandonment of dispersal. Even if public and Parliamentary opinion were prepared to accept that there should be no planning for dispersal of women and children from cities, we do not, as we have already indicated, think that it would be right, by taking such a decision now, to deprive a future Government of the power to decide in a time of emergency whether or not dispersal was desirable. 12. We therefore recommend t h a t : (a) a public announcement that a dispersal scheme is to be prepared should be made in the Statement on Defence this m o n t h ; (b) local authorities should then be told about the scheme as indicated in paragraph 6 of this paper; (c) the local authority associations should be consulted about arrangements for planning the scheme in detail. R. A. B. J. M . C. H. 9th February,
1962.
Printed for the Cabinet.
C. (62) 27 13th February,
February
1962
Copy N o .
50
1962 CABINET
ECONOMIC
POLICY A N D ' PUBLIC
EXPENDITURE
MEMORANDUM BY THE CHANCELLOR OF THE EXCHEQUER
The Cabinet will wish to be aware of the course of the discussion in the Economic Policy Committee on 7th February about the economic case for moderating the proposed increases in public investment. T h e relevant extract from the minutes is attached at Annex A. This present paper is circulated to the Cabinet in fulfilment of the undertaking I gave to the Committee. 2. On present plans, public service investment will increase by 6 per cent, in 1962*-63 and by nearly 10 per cent, in 1963-64. I am clear that this is too much, but it will be seen from Annex A that there was a division of opinion in the Economic Policy Committee. Hereunder I take the main points raised and examine them. Some of them relate not only to the proposed increase in public investment, but to the prospective increase in public expenditure generally. (a) Will the economy be overloaded or not in 1963-64 and thereafter? 3. To judge of this, it is largely irrelevant to discuss the degree of slack in the economy at the present moment (beginning of 1962). What is relevant is the picture of the total load on the economy in 1963-64 and the following few years. The Report on Public Expenditure and Resources, 1961-62 to 1965-66, commissioned by the Cabinet on 28th March, 1961 (C.C. (61) 19th Conclusions, Minute 4), and circulated with C. (61) 88 last summer pointed unmistakably to increasing difficulty in meeting all the calls that will be made upon our resources. 4. That is why the whole question of having a long-term public expenditure plan has arisen. If the prospective resources were big enough to provide for all our defence, oversea aid, social policy, agricultural policy, etc., with enough also to look after the expectations of the public for a higher standard of living, enlarged industrial and other private investment to sustain economic growth, and (most essential of all) the exports needed to put our balance of payments right, there would be no difficulty. But the best assessment which it was possible to make of the matter, fully discussed between senior officials of all Departments last year, pointed clearly to the fact that this was not so. Later work now nearing completion suggests, unhappily, that the above mentioned Report (C. (61) 88) was in fact too optimistic, and that the threatened overload is going to be still greater than was then thought. 5. We are starting from a position of deficit, since the current volume of our exports is insufficient to enable us to cover all the disbursements abroad that we have to make, including provision for aid and for capital investment. It is true that at this moment we have some slack, though it is open to question whether this slack is more than is necessary to provide for movement of resources between one use and another. In some directions there is ample plant capacity to spare; but the true bottleneck at present is skilled labour. We could not man all our capacity with the labour available. 6. The shortage of skilled labour is particularly acute in the building and engineering industries. If exports were at the level that we require, this shortage 60406
A
would be correspondingly more acute (see paragraphs 16-17 below). If for example we are right in thinking that we ougbrt to aim at expansion in exports of the order of 10 per cent, by volume between now and the spring of 1963, this will be equivalent to an additional output of the order of £360-400 million, or (say) 1^ per cent, of our total national production. 7. Again, we Have to reckon on an increase of £100 million a year in total public investment (even if the proposals of the Chief Secretary, Treasury, for /reduction are accepted in full), and possibly about £150 million a year in other public purchases of goods and services (defence, education, health, etc.). For this we are pre-empting another 1 per cent, a year of the total national production. 8. If exports (and public sector expenditure) increased by drawing into employment workers who are at present idle—and unemployment in total is now only 2 per c e n t . - o r if such short-time working as there is were brought to an end and succeeded by overtime, the additional earnings that would result both for labour and for capital would be bound to lead to some more demand for consumption goods and services. And the growth of production leads to growth in the demand for private investment. 9. In other words, if we are to get on top of our balance of payments problems, and retain our public service programmes, we need all the slack we at present have and more. 10. It is much too early to say with precision what will be the short term economic position in 1963-64. But there is evidence amounting to a clear prospect of accumulating pressure on resources, lor exports (if we succeed in making ourselves solvent) and for the growth of the public sector. There would be plenty of time to add to the public investment programmes later if by any chance this proved to be desirable—they are looked at again in July, to see if short-term adjustments are needed. But most Departments want long-term decisions—e.g., decisions on " starts " in 1963-64 which will commit investment expenditure into 1964-65 and 1965-66. 1.1. Repeatedly in the last 18 months the Government have said that public investment programmes cannot be properly handled by " stop-and-go " policies depending upon the short-term economic position. These statements have been widely welcomed. The public investment and public expenditure programmes generally must be based on a long-term view. The long-term evidence of continuing overload on our resources is conclusive. (b) Would not a successful incomes policy alter the basis of the balance of claims and resources, reduce demand and provide room for more public investment? 12. It cannot be argued that income restraint will do the trick and that there is no need for further reductions in expenditure. There is an important difference between wage and income restraint on the one hand and a reduction in expenditure on goods and services on the other. T h e object of wage restraint is to prevent the value of the currency, at home and abroad, from being eroded. Other things being equal, if wages increase, fairly quickly prices increase correspondingly and thus the value of the currency falls. Though some sections may end up better off and others (those on fixed incomes) worse off, the total purchasing power of the people is unaffected. This may not be true in the very short run, when profit margins do not immediately respond to competitive impulses; but it quickly becomes true. 13. If we are unsuccessful in preventing the economy from being overloaded —-in the sense that demand on resources is excessive—we are bound to end up with a demand inflation and the usual balance of payments crisis. This is likely, indeed, to make wages rise faster than before, because if there is heavy Government spending it will aggravate the situation by accentuating the shortage of labour. It is important to bear in mind the distinction between demand inflation and cost inflation. If the Government is unsuccessful in obtaining wage restraint, admittedly we fail to stop cost inflation, but we can none the less stop demand inflation if only we keep a grip of the Budget. 14. Indeed, the truth of the matter is that an incomes policy cannot be successfully sustained unless demand is kept well within resources and overload is prevented. Preventing overload is one essential condition for the success of an incomes policy.
(c) Would not higher taxation be better than restraining the growth of public expenditure? 15. We can reduce the growth of total demand either by checking the growth of public expenditure or by raising taxes. There is not however an exact symmetry between the two. A reduction in expenditure is almost certain to mean a lower demand for resources. An increase in taxation, on the other hand, may or may not restrain demand, since efforts will be made to pass it on to someone else and in the long run the public may reduce savings to pay the taxes. Furthermore, we cannot ignore the effect of increased taxation on incentives, or on the export drive; and of course the political implications are obvious. (d) Is this overall treatment realistic? Ought we not really to be looking at individual industries and individual places? 16. The analysis of national income and expenditure tends to equate one type of demand collectively with another, with little regard to the specific resources that are in demand. But the opposite point of view, insisting on the individuality of resources, has far-reaching implications. If we think in terms of adjusting demand to supply; industry by industry, we are forced step by step to introduce a series of controls with this purpose in mind. In fact the assumption that different types of demand on resources substantially equate with one another is a good working rule. There is a high degree of inter-industry mobility and a comparatively small margin of unused resources (particularly manpower resources) available to be redistributed if the shortage is more critical in one industry than in another. 17. F o r example, a recent report of a Working Party appointed by the Ministry of Labour showed that about one-third of the engineering and of the building workers in the country are employed outside the engineering and building industries respectively. It also showed that there Was still in September 1961 an acute shortage of skilled workers in a wide range of engineering and allied trades and among building craftsmen in practically every region of the country. Any change in the demand for building and engineering labour therefore makes itself felt not only in those two groups of industries but in a whole range of other industries. It is not true that employment in the building industry remains more or less constant from one year to another, or that there is no competition for labour between it and export industries. 18. Geographical mobility is more limited than industrial mobility, although over a period there is considerable mobility, specially for example of Irish labour. While there is something to be said for the view that cutting down building work in areas where the building industry is not under pressure is of less advantage to the economy than cutting it down in London or Birmingham, it is not clear that the building industry is going to have any substantial margin of spare capacity in any part of the country. (e) Would not the chance of success of an incomes policy be prejudiced by measures limiting the growth of social services (or by cuts such as welfare milk)? 19. Ten years ago this question in another form was being used as an argument against the wisdom of our abolishing the food subsidies. As a matter of historical fact, there is little evidence that, in the past, workers' attitudes to wage claims have been affected by Government policy on social services. The Trades Union Congress has in this case expressly rejected the incomes policy, and is hardly likely to have its attitude changed by marginal alterations in public investment policy or indeed by decisions on welfare milk or school meals. 20. Again it must be emphasised that a sure way to wreck the incomes policy is to permit overload of resources. This is, incidentally, clearly shown in Dutch experience. (f) The strength of Sterling 21. Moreover, there is another consideration. If people here and abroad see Government expenditure appearing not to be under firm control they will draw their own conclusions about the prospect of inflation; and if they draw a conclusion 60406
unfavourable to us, all our hopes of steady growth will go too. It is wise to remind ourselves that, taking into account our oversea commitments, the pound is being sustained at present by an inflow of capital, and that this could very rapidly change if foreign holders of sterling were not persuaded that we were taking a strong grip of the economy. 22. The issue of principle which the Economic Policy Committee has remitted to the Cabinet to decide is whether, following a 6 per cent, increase in public service investment in 1962-63, the Government can undertake a 10 per cent, increase in 1963-64 without overloading the economy in that year and thereafter. In the light of the foregoing, I am sure we cannot. S. L.
S.W.1, Treasury Chambers, 12th February, 1962.
ANNEX A -EXTRACT- F R O M T H E M I N U T E S O F T H E E C O N O M I C ; C O ^ r T T E E - O N 7th F E B R U A R Y , 1962 ' :
s
POLICY \
The Chief Secretary, Treasury, said that it would be necessary to make a public statement on the steps which the Government were taking to control public expenditure before the publication of the Vote on Account on 27th February. It was therefore urgent to take final decisions not only on the level of the estimates for 1962-63, but on the investment programmes for the public sector for the year 1963-64. All the Treasury forecasts showed that there was likely to be a continued overload on the economy for some years ahead, and it was essential t o ensure that the public sector did not absorb resources which could be used by private industry to promote the level of exports. Paragraph 3 of E.A. (62) 16 showed that the level of investment in the public services (as distinct from the nationalised industries) rose in 1961-62 by 12^ per cent, over 1960-61 and was planned to increase by a further 6 per cent, in 1962-63 and nearly 10 per cent, in 1963-64. The latter increase was far in excess of any likely increase in the gross national product and if an economic crisis were to be averted it would be necessary to reduce the rate of increase of public service investment in the three years 1963-64 to 1965^66 by at least £50 million a year. He thought it fair to ask all -Ministers to help him to contain the growth within the limit he had set himself. He had therefore asked for a number of reductions in Departmental programmes for public service investment in addition to those discussed at earlier meetings. Even so, the total list would produce economies amounting to only £42^ million a year. He had therefore suggested other cuts in the proposed expenditure on the nationalised industries which would go some way to meet the gap between £42^ million and the target of £50 million. In discussion doubt was expressed whether there was in fact likely to be an overload on the economy in 1963-64. There was some evidence already that some industries, especially the steel industry, were not working to full capacity and could with advantage take more home orders which, by enabling them to spread their overhead costs, could make them more competitive in the export markets. Moreover, figures relating to architects' commissions showed that there had been a considerable fall in new orders between the first and third quarters of 1961 (the latest available figures), particularly in the private sector. It seemed therefore wrong to assume that the construction industries would not have enough capacity to take on the investment programme proposed for 1963-64 and subsequent years. It was argued, on the other hand, that there was plenty of evidence that the economy was overloaded. Despite the rigorous measures taken in July 1961, unemployment at the seasonal peak in January 1962 had reached a level of only 2 per cent. If any of the restrictive measures were removed the margin of slack in the economy would soon disappear. The spare capacity in such industries as the steel industry was required for the increase in exports which was essential to avoid a further balance of payments crisis and to increase the rate of economic growth. As regards the load on the building industry itself, there were still many more outstanding vacancies for carpenters and bricklayers than the supply, and if the present rate of apprenticeship training continued, the situation would get worse rather than better. The success of the Governmenfs incomes policy depended on the self-discipline and co-operation of the public. This would not be forthcoming if the Government did not show that they believed in and were planning for economic growth. The figures in paragraph 3 of E.A. (62) 16 showed an increase of 22 per cent, in the level of public service investment in 1965-66 over 1961-62, which was not too high a rate of investment if the objective were to seaire economic growth of 4 per cent, a year. Against this it was argued that it was important that the growth should take place in the right parts of the economy and that moderate restraint on home demand would help to promote exports. Moreover, the figures given in E.A. (62) 16 for the years after 1963-64 were likely to be understated. The public statement that would
be made would not give the impression that the Government were cutting back their investment programmes: the schools programme was the only one which had been published and the Government would have to say that in present circumstances the increase in this programme would have to be phased. It was argued that if the Governments incomes policy proved successful, the slower increase in incomes would lessen the load on the economy and provide room by 1963-64 for the £50 million of public service investment which the Chief Secretary, Treasury, was now proposing to cut. On the other hand, a reduction in the growth of incomes did not reduce demand to the same extent: its effect was mainly to keep prices steady and to avoid a cost inflation. The country would not escape inflation caused by excess demand if the Government allowed programmes which would clearly overload the economy. It was suggested that if it was necessary to reduce demand over the economy as a whole, higher taxation might be a better method of achieving the Governments objectives than a reduction of public authority investment programmes. Against this it was argued that higher taxation would increase the costs of industry and make it more difficult to secure an expansion of exports. Moreover, higher taxation was not as effective a method of reducing the load on the economy as controlling investment programmes, since the money required for increased taxes might merely be withdrawn from savings without any reduction in economic activity.
The Chancellor of the Exchequer, summing up, said that there was a division of view in the Committee on the economic arguments which were the basis of the proposals put forward in E.A. (62) 16 for a reduced rate of growth in public investment. He would therefore arrange, in consultation with the Chief Secretary, Treasury, for a memorandum to be submitted to the Cabinet.
SECRET
Printed $or the Cabinet.
February
C. (62) 28 13th February,
1962
Copy N o .
50
1962
CABINET
DECISIONS ON
SAVINGS-
MEMORANDUM BY THE C H I E F SECRETARY TO THE TREASURY AND PAYMASTER GENERAL
This subject has been before the Cabinet for over two months, and the time has come for decisions. The Vote on Account has to be published on Tuesday, 27th February, and either on that day or before a statement on public expenditure will have to be made to Parliament. Estimates, 1962-63 2. After stringent Treasury scrutiny, the Estimates are £111 million above the level set by the Chancellor^ " 2\ per cent, pledge " of 25th July. 3. This is much more than can be explained away. There are three offsets within our power: (i) Abolish welfare milk subsidy except for families with four or more children or three under-fives (saving £15 million in 1962-63, £20^ million in a full year). (ii) Raise price of school meals by 6d. (saving £17 million a year). (iii) Agriculture, in accordance with C.C. (62) .11th Conclusions, Minute 6 (saving £16 million a year). 4. We cannot announce (iii) until March when the Farm Price Review is completed, but we must decide (i) and (ii) now because they affect the Vote on Account. I am also raising with the Ministers concerned some minor but useful savings not effective at once for these Estimates, e.g., termination of dedication grants to private woodland owners. 5. Even if we take credit for a full year's savings, the total will still be some £55-60 million over the pledge figure: on the cash basis for the year, more like £70 million over. This is too much. T o reassure critical opinion at home and abroad we must show that we are also taking firm decisions to contain the longer-term growth of public expenditure. This primarily means public investment: the decisions for 1963-64 investment expenditure, subject as always to final review in July, are already several months overdue. Public Investment, 1963-64 6. To limit the growth of public service investment expenditure in 1963-64 to 6 per cent, above 1962-63 (which itself will be 6 per cent, above 1961-62), I have proposed: . Housing Approvals of 105,000 instead of 110,000 in 1963 (compared with 100,000 in 1962, and the 120,000 that the Minister would like thereafter). Reduction of £12Jf million on investment programme. 60400
Education Spread over of starts envisaged for 1962-63 and 1963-64 over (say) 28 months instead of 24. Reduction of £15 million on investment programme in 1963-64. The Minister is unwilling to reduce by more than £5 million. Health Reduction of Ministry's 1963-64 investment expenditure on hospitals and local health and welfare services by £5^ million (the same proportionate reduction as is asked from Ministry of Education). (The Minister of Health has accepted these reductions, on the understanding that other Ministers are willing to do their share.) Scottish Departments
Reduction of £2 million in 1963-64.
Home Office and other Departments Reduction of 3 per cent, in 1963-64. Saving of £2-J million. (The Home Secretary has accepted these reductions on the understanding that other Ministers are willing to do their share.) These are difficult decisions, for they take our various expansion plans a little slower than had been hoped. I should add that the Minister of Housing has agreed to a £10 million cut for Water and Sewerage, and also that a five-year Road programme was announced some months ago which represents less than half the expansion that the Minister of Transport wanted. 7. For nationalised industries, we must obviously meet the essential requirements for power, transport and communications in order to develop economic growth, but my proposals include a marginal cut in electricity, an increase in the self-financing of the Post Office, and continued withholding of approval for starting the Victoria Tube. 8. In public investment as a whole (public service and nationalised industries) the total in 1963-64 would still, on these proposals, be over £100 million higher than in 1962-63. 9. If we do not make these reductions, we shall then be running just the same jisks as have proved so frustrating to our hopes time after time in the last 10 years. We have been here before; but this time there are two new circumstances: (i) The specific " pledge ". We are far from carrying this out, but acceptance of the proposals in this paper could fairly be regarded as an earnest of determination to put our affairs in order. In all this we have to consider what effects our action or inaction will have on overseas confidence in us. (ii) In our endorsement of the Plowden Report and specifically in The Queen's Speech we have accepted the policy of keeping public expenditure within limits justified by the national resources. If these proposals are not accepted, we shall have nothing to say in public, except to admit an unbalanced position which we are failing to remedy. 10. The questions for decision appear to me to be: (i) Whether we should adopt the proposals in paragraph 3 for welfare milk and school meals, and such minor savings as are under discussion. (ii) Whether we should accept the proposals for controlling the rise in public investment in 1963-64. H. B.
Treasury Chambers, 12th February,
S.W. 1, 1962.
C. (62) 2,9
C O P Y NO.
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13th F e b r u a r y , 1962 CABINET
SERVICE F A Y AND THE P A Y PAUSE M e m o r a n d u m b y t h e M i n i s t e r .of D e f e n c e
T h e Griftft R e p o r t B e f o r e 1958 t h e r e w a s m u c h d i s c o n t e n t in t h e S e r v i c e s a b o u t p a y . T h e r e was a g e n e r a l feeling that they w e r e constantly lagging behind t h e i r civilian counterparts. In t h a t y e a r t h e A d v i s o r y C o m m i t t e e on R e c r u i t ing u n d e r t h e C h a i r m a n s h i p of S i r J a m e s G r i g g r e c o m m e n d e d " t h a t t h e r e s h o u l d be a n a u t o m a t i c b i e n n i a l r e v i e w of p a y w h i c h s h o u l d t a k e i n t o a c c o u n t m o v e m e n t s in c i v i l i a n e a r n i n g s . . , . The review should cover pensions also". In a c c e p t i n g i t s f i n d i n g s t h e t h e n M i n i s t e r of D e f e n c e s a i d in the H o u s e of C o m m o n s - " O u r a c c e p t a n c e of the B i e n n i a l R e v i e w s h o u l d be r e g a r d e d , a n d I w i s h i t t o be s o r e g a r d e d , by t h e S e r v i c e s a s an h o n o u r a b l e u n d e r t a k i n g t h a t we i n t e n d to m a i n t a i n t h a t p o s i t i o n in t h e future I think it e s s e n t i a l that the S e r v i c e s should h a v e ' c o n f i d e n c e in t h e f a c t t h a t t h e i r p a y a n d p e n s i o n s w i l l b e m a i n t a i n e d at a l e v e l w h i c h c o m p a r e s with w h a t i t m i g h t be p o s s i b l e f o r t h e m t o e a r n in c i v i l i a n l i f e " . So f a r a s o t h e r r a n k s a r e c o n c e r n e d , t h i s r e v i e w c o n s i s t s of a n e x a m i n a t i o n b y t h e T r e a s u r y , t h e M i n i s t r y of D e f e n c e a n d t h e S e r v i c e D e p a r t m e n t s of e a r n i n g s in i n d u s t r y o v e r a p e r i o d w h i c h in t h e c a s e of t h e c u r r e n t r e v i e w e n d e d i n J u l y , 1961, i . e . , b e f o r e t h e p a y pause was announced. F o r officers the y a r d s t i c k u s e d is the c o m p a r a b l e g r a d e s of t h e H o m e C i v i l S e r v i c e .
2. The r e v i e w h a s shown - and t h e r e is no dispute about this - that t h e j u s t i f i a b l e i n c r e a s e f o r o t h e r r a n k s i s a b o u t 141; p e r c e n t , and t h a t f o r o f f i c e r s 4 p e r c e n t . . D e t a i l e d p r o p o s a l s f o r i n c r e a s e s in p a y h a v e b e e n s u b m i t t e d to t h e T r e a s u r y w h i c h , in o r d e r to a l l o w a s m o o t h t r a n s i t i o n a s b e t w e e n o t h e r r a n k s a n d o f f i c e r s , a v e r a g e 13 p e r c e n t f o r o t h e r r a n k s a n d l\ p e r c e n t f o r o f f i c e r s . P a y , h o w e v e r , is only p a r t of the S e r v i c e m a n ' s b a s i c e m o l u m e n t s c o m p a r a b l e w i t h t h e e a r n i n g s of a c i v i l i a n . The T r e a s u r y w e r e t h e r e f o r e a l s o a s k e d to a g r e e to an i n c r e a s e of t h e s a m e p e r c e n t a g e s i n m a r r i a g e a l l o w a n c e . 3. If we w e r e to a b a n d o n t h i s r e c e n t l y e s t a b l i s h e d p r o c e d u r e we s h o u l d , f i r s t l y be in a b r e a c h of a s o l e m n o b l i g a t i o n ; a n d , s e c o n d l y , a l l t h e old s u s p i c i o n s w o u l d b e r e - a w a k e n e d t h a t t h e F o r c e s w e r e o n c e a g a i n going t o be f o r c e d b a c k t o t h e end of t h e q u e u e . The i n c r e a s e s w h i c h h a v e b e e n p r o p o s e d r e p r e s e n t , a f t e r a l l , t h e e x t e n t to w h i c h t h e S e r v i c e s have a l r e a d y fallen behind their civilian opposite n u m b e r s . -1CONFIDENT1AL
The R e c r u i t i n g P r o b l e m 4. A p a r t f r o m o u r o b l i g a t i o n s t h e r e i s t h e p r o b l e m of r e c r u i t i n g . We h a v e j u s t h a d s o m e f o u r o r five good r e c r u i t i n g m o n t h s but s o m e of. m y c o l l e a g u e s w i l l r e m e m b e r t h e a n x i o u s c o n s i d e r a t i o n w h i c h we h a d t o give t o t h i s m a t t e r a b o u t t w e l v e m o n t h s a g o . S i n c e t h e n , we h a v e m a d e o u r m a x i m u m effort b u t e v e n now we a r e n o t out of o u r d i f f i c u l t i e s . To r e a c h Our m i n i m u m t a r g e t we m u s t c o n t i n u e to do a s w e l l a s at p r e s e n t and if we f a i l to m e e t o u r r e c r u i t i n g t a r g e t s f o r t h e b e g i n n i n g of 1963, t h e n t h e whole R e g u l a r S e r v i c e c o n c e p t on w h i c h o u r d e f e n c e p o l i c y is b a s e d will be a t r i s k . I m u s t m a k e it q u i t e p l a i n t h a t , a f t e r the m o s t c a r e f u l c o n s u l t a t i o n w i t h m y S e r v i c e c o l l e a g u e s , t h e C h i e f s of Staff, t h e P e r m a n e n t S e c r e t a r i e s and Sir F r e d e r i c Hooper, m y h o n o r a r y a d v i s e r on r e c r u i t m e n t , it s e e m s c e r t a i n t h a t if we f a i l t o l i v e up to our u n d e r t a k i n g on p a y , we s h a l l d a m a g e r e c r u i t m e n t , w i t h a l l t h e g r a v e c o n s e q u e n c e s t h a t w o u l d flow f r o m f a i l u r e to m e e t o u r m i n i m u m t a r g e t s . S p e c i a l P o s i t i o n of the S e r v i c e s 5. It is t h u s c l e a r t h a t we a r e f a c e d w i t h a difficult p r o b l e m . It i s one t h a t u n f o r t u n a t e l y c a n n o t b e p o s t p o n e d if we a r e t o k e e p f a i t h w i t h the S e r v i c e s . E v e n in p r e s e n t c i r c u m s t a n c e s I a m q u i t e s u r e t h a t it w o u l d be w r o n g a n d u n j u s t t o t r e a t t h e S e r v i c e m a n a s a c o m p a r a b l e c a s e to t r a d e u n i o n i s t s o r e v e n to the p r o f e s s i o n a l s . Unlike the g r e a t body of c i v i l i a n w o r k e r s , h e h a s no u n i o n t o a d v a n c e h i s c l a i m s or p r o t e c t his interests. He i s not f r e e t o give n o t i c e a n d m o v e t o o t h e r e m p l o y ment. He c a n n o t w o r k t o r u l e o r s t r i k e a n d i n d e e d in p e r i o d s of i n d u s t r i a l u n r e s t m a y w e l l find h i m s e l f k e e p i n g t h e life of t h e n a t i o n going by w o r k i n g in t h e d o c k s o r p r o v i d i n g e s s e n t i a l s e r v i c e s . Above a l l , he h a s e n t e r e d i n t o a b i n d i n g c o n t r a c t f o r a p e r i o d of y e a r s in t h e b e l i e f t h a t t h e G o v e r n m e n t will p r o t e c t h i s i n t e r e s t s . It m a y be s a i d t h a t s o m e of t h e s e c o n s i d e r a t i o n s a p p l y to o t h e r f i e l d s of p u b l i c s e r v i c e , b u t t h e fact i s t h a t t h e S e r v i c e s a r e , a n d a r e g e n e r a l l y r e g a r d e d a s b e i n g , in a c l a s s a p a r t , a n d for t h i s r e a s o n I b e l i e v e a c a s e can be m a d e f o r t r e a t i n g t h e i r p a y a s a s e p a r a t e i s s u e on t h e l i n e s i n d i c a t e d i n p a r a g r a p h 5 of t h e White P a p e r on i n c o m e s p o l i c y ( C m n d . 1626): "It f o l l o w s t h a t t h e r e i s no s c o p e in 1962 f o r m o r e t h a n s t r i c t l y l i m i t e d i n c r e a s e s in wages and s a l a r i e s . In m a n y c a s e s t h e r e m a y i n d e e d be no j u s t i f i c a t i o n a t p r e s e n t for a n y i n c r e a s e s a t a l l . In o t h e r s t h e r e m a y be p a r t i c u l a r c i r c u m s t a n c e s w h i c h p o i n t t h e o t h e r ^ w a y " . How c a n we h a n d l e t h i s s i t u a t i o n ? 5. I a m s u r e t h a t , e v e n in p r e s e n t c i r c u m s t a n c e s , m y c o l l e a g u e s w i l l not w i s h m e t o r e p u d i a t e t h e m a c h i n e r y w h i c h h a s b e e n b u i l t up s i n c e t h e G r i g g R.eport. If t h i s i s s o , t h e n t h e p r o b l e m i s how to give t h e S e r v i c e s i n c r e a s e s w h i c h t h e y c a n b e e x p e c t e d t o a c c e p t a s fulfilling t h e G r i g g p r o c e d u r e w i t h o u t c r e a t i n g a n u n a c c e p t a b l e b r e a c h in t h e G o v e r n m e n t s incomes policy. In m y v i e w , t h e l e a s t t h a t s h o u l d b e done i s t o give t h e m t h e i n c r e a s e s in p a y w h i c h I h a v e p r o p o s e d to t h e T r e a s u r y and w h i c h a v e r a g e 13 p e r c e n t for o t h e r r a n k s a n d l \ p e r c e n t for officers. F o r m y p a r t , I s h o u l d b e p r e p a r e d , on t h i s o c c a s i o n , -2-
CONFIDENTIAL
not to p r e s s f o r the p a y m e n t of p r o p o r t i o n a t e i n c r e a s e s in m a r r i a g e allowance. We m u s t , h o w e v e r , r e g a r d t h e S e r v i c e m a n s e q u i v a l e n t of c i v i l i a n w a g e s a s i n c l u d i n g n o t only h i s p a y but h i s m a r r i a g e a l l o w a n c e and r a t i o n a l l o w a n c e , in w h i c h c a s e we a r e e n t i t l e d to r e l a t e t h e i n c r e a s e s t o t h e s u m t o t a l of t h e s e e m o l u m e n t s . T h u s we c a n f a i r l y s t a t e the i n c r e a s e s a s r e s p e c t i v e l y 9. 5 p e r c e n t a n d 5. 3 p e r c e n t . I consider, as do t h e S e r v i c e M i n i s t e r s , t h a t we s h o u l d b e e n t i r e l y j u s t i f i e d , e v e n in p r e s e n t c i r c u m s t a n c e s , in p r o c e e d i n g with a s e t t l e m e n t on t h i s b a s i s a n d t h a t it c o u l d be d e f e n d e d . But we a r e a n x i o u s t o go aa f a r a s we p o s s i b l y c a n a t t h i s t i m e t o b u t t r e s s the G o v e r n m e n f s p o l i c y of w a g e restraint. I a m t h e r e f o r e p r e p a r e d on t h i s o c c a s i o n to a g r e e t h a t , w h i l e m a k i n g i t c l e a r t h a t we a r e c a r r y i n g out t h e G r i g g p l e d g e , we f e e l it r i g h t in t h e s p e c i a l c i r c u m s t a n c e s of t h i s y e a r to i m p l e m e n t i t only t o t h e e x t e n t of p a y i n g half of t h e a m o u n t due on 1st A p r i l , 1962, t h e b a l a n c e to be p a i d w i t h effect f r o m 1st A p r i l , 1963. T h i s m e a n s , so f a r a s o t h e r r a n k s a r e c o n c e r n e d , t h a t t h e y would r e c e i v e 4-f p e r c e n t on 1st A p r i l t h i s y e a r . This is a c o n s i d e r a b l e s a c r i f i c e and I m u s t w a r n m y c o l l e a g u e s t h a t i t m a y h a v e a v e r y s e r i o u s effect on r e c r u i t m e n t , b u t I t h i n k it r i g h t t o offer it i n an a t t e m p t t o m a i n t a i n -the full f o r c e of t h e p o l i c y of r e s t r a i n t . r
C o s t of P a y P r o p o s a l s 7. T h e c o s t of t h e i n c r e a s e s w h i c h I h a v e p r o p o s e d , i n c l u d i n g p r o p o r t i o n a t e i n c r e a s e s in p e n s i o n s , would be a p p r o x i m a t e l y £14 m i l l i o n during the next financial y e a r . S e r v i c e D o c t o r s 8. T h e r e i s a s p e c i a l p r o b l e m r e l a t i n g t o t h e p a y of m e d i c a l o f f i c e r s of t h e S e r v i c e s on w h i c h I s h a l l be s u b m i t t i n g s e p a r a t e p r o p o s a l s as soon as p o s s i b l e . Recommendation 9.
I a s k m y colleagues to a g r e e : (a) t h a t t h e G o v e r n m e n t s h o u l d m a k e c l e a r t h e i r i n t e n t i o n of c a r r y i n g out t h e i r p l e d g e t o maintain the biennial r e v i e w system; (b) t h a t t h e i n c r e a s e in S e r v i c e e m o l u m e n t s s h o u l d be 9. 5 p e r c e n t f o r o t h e r r a n k s a n d 5 . 3 p e r c e n t for o f f i c e r s , to be s p r e a d equally over two y e a r s .
H. V/.
M i n i s t r y of D e f e n c e , S. W. 1. 13th F e b r u a r y , 1962.
CONFIDENTIAL
Printed for the Cabinet.
C. (62) 30 12th February,
February
1962
t*.
Copy N o . g fj . - - -
1962
CABINET
ROTODYNE N O T E BY THE M I N I S T E R O F AVIATION
I annex a memorandum which was prepared for the Defence Committee oh the Rotodyne.
It is for various reasons desirable to reach a conclusion on the
future of this project if possible at the same time as we consider the paper on the Light Cargo Aircraft. 2.
Though cancellation of this project will involve me in further problems
with the aircraft industry, I feel compelled to recommend, on the assumption that the Avro 748 is selected for the Light Cargo Aircraft requirement, that the Rotodyne be cancelled. P. T.
Ministry
of
Aviation,
9th February,
60397
1962.
ANNEX F U T U R E OF THE R O T O D Y N E MEMORANDUM BY THE MINISTER OF AVIATION
lit: For some years past our policy in regard to large helicopters has been based on the Rotodyne, a unique project offering considerable promise in both civil and military applications. The stage has now been reached, however, when development can no longer continue in the absence of a production order. Either a firm order should be placed now, or the project should be dropped altogether. History of the Project 2. The technical originality of the Rotodyne lies in a combination of the principles of rotary and fixed wing flight, by haying a rotor for vertical lift and propellers for forward propulsion; because of this, the Rotodyne offers considerable advantages over conventional helicopters in size, speed, and operating costs. At present, there is no competitor anywhere in the world in the same class. 3. The project began as a private venture in 1947. F r o m 1950-57 the Government supported it, together with the development of the Eland 3 engine, as a research project. The costs were borne partly on the Defence Budget and partly as a charge to civil votes. During 1958 and 1959 the Government contribution was withdrawn owing to the absence of a firm requirement for the Eland powered aircraft. However, plans for a new and better version of the Rotodyne incorporating the Tyne engine were evolved, which was much more attractive to British European Airways. It was also of great interest to the Service Departments, and a military requirement was approved by the Defence Board in June, 1959. Consequently, a new development contract was placed in February, 1960, under which the Government undertook to provide one half of the future development costs, within a maximum of £4 million- When Westlands took over Fairey Aviation and other companies to form the present helicopter group, it was made clear to them that the Government attached great importance to the Rotodyne project continuing in accordance with the terms of the contract. 4. It was also announced early in 1960 that negotiations would be opened by the manufacturers with British European Airways, in respect of a civil order (initially for six aircraft), and with the Ministry of Aviation in respect of a military order. An agreement was reached with British European Airways whereby the Government would contribute up to £1-4 million towards the costs of introducing the Rotodyne into service. It was expected that the contract negotiations with the manufacturers would take some time since detailed technical specifications had to be worked out. After two years, however, neither of these orders has yet been placed, and while considerable interest has been aroused in oversea markets (particularly in the United States) this in itself is not a sufficient basis to enable the project to proceed. The Military Requirement 5. The Service requirement for a fleet of 12 Rotodynes approved by Ministers in June 1959 was based on the need to provide a short range, vertical take-off and land (VTOL), light cargo lift to support forces operating in the field. It is designed to be independent of prepared airstrips which are difficult and expensive in manpower to construct and maintain, particularly in thickly-wooded or mountainous country, and often unusable in heavy rainfall. It would give much greater flexibility to a commander because he would not have to base his deployment on the availability or construction of airstrips. It would also avoid the need for transferring loads from short take-off and land (STOL) to VTOL aircraft and vice versa, with consequent administrative overheads, delays and discomfort to casualties. Finally, the Rotodyne is capable of being used as a crane. The only other large VTOL aircraft being ordered for the Royal Air Force—the Belvedere —lacks the heavy lift capacity of the Rotodyne. Without the latter it will not be possible to carry such equipment as engineer assault bridging and other heavy
bridging equipment direct to bridging sites, nor will it be possible to lift armoured cars and a number of items of engineer equipment necessary for the construction of airstrips. Nevertheless, in their recent report on British strategy in the 1960s the Chiefs of Staff reluctantly conclude that provided that they have a suitable fleet of light cargo aircraft the additional operational advantages afforded by the Rotodyne are not so essential as to justify, against the stringent financial background of their study, the capital and running costs involved (£14 million and £2 million per annum respectively). The Civil Requirement 6. British European Airways have recently expressed the view to me that there are considerable doubts about the economic operation of the Rotodyne in a civil role. I am at present consulting British United Airways as to whether they would be interested in operating the Rotodyne on the terms that were offered to British European Airways. But whatever their answer may be, the project cannot continue without a military as well as a civil production order. Equally, if there were no civil requirement, the cost of. meeting a military requirement for only 12 Rotodynes would become prohibitive. The Consequences of Cancellation 7. If it were decided not to proceed with the Rotodyne the consequences would be as follows. In the military field, the Services would lose the only heavy lift aircraft with a vertical take-off and landing capability available before the 1970s, capable of undertaking the tasks described in paragraph 5 above. - In the civil field, we should be abandoning a project which is unique of its kind and might achieve a break-through in export markets, without having any other plans for developing an alternative British helicopter in this class. Complaints would be made that the Government were failing to carry out their declared policy of supporting the civil industry, and that little purpose had been served in encouraging the formation of a helicopter group when its main forward-looking project was to be abandoned. Financial Considerations 8. If the development contract is cancelled (and under the terms of the contract Westlands can require us to cancel it if we do not place a military production order within a reasonable time) the Government become liable for expenses incurred since September 1959. It is estimated that the total liability might amount to between £2 million and £3 million. If we add the payments made by the Government on earlier research contracts (for airframe and engine £11 million), the total nugatory expenditure on the project would be in the neighbourhood of £14 million. 9. If we decide to persevere with the project, the total cost to Her Majesty's Government will be considerable. A military production order costing £14 million would be the minimum required. So far as development costs are concerned, in addition to the balance of the contribution of £4 million already promised to Westlands for the airframe, there have recently been proposals for further engine development (the RB-176) which would cost Her Majesty's Government £3-5 million. Further, we have undertaken to contribute £ T 4 million towards losses in introducing the Rotodyne into service. Finally, there would be a contingent liability involved in giving the first civil operator an indemnity against limitations on operating the Rotodyne in London on account of noise. 10. I invite my colleagues to consider whether, in the circumstances described in this paper, they are content that the Rotodyne should be abandoned. If the answer is " Yes ", it will become all the more important to reach early decisions about other future projects in the aircraft industry, as urged in mv Cabinet paper C. (61) 150 of 6th October last. P. T. Ministry of Aviation, W.C. 2,
8th February, 1962.
Printed for the Cabinet.
C. (62) 31 23rd February,
February
1962
Copy No.
50
1962
CABINET
BERLIN MEMORANDUM BY THE SECRETARY OF STATE FOR FOREIGN AFFAIRS
I annex for the information of my colleagues copies of three interesting telegrams from our Ambassador in Washington, Sir David Ormsby Gore, about his conversation with President Kennedy on the Defence White Paper and Berlin. 2. President Kennedy is obviously dissatisfied with the meagre response of his European Allies to the military build-up which the Americans carried through last autumn in order to make Mr. Khrushchev realise that they meant business over Berlin. The President seems to doubt whether the extra United States effort can be maintained indefinitely in view of the lack of a matching contribution from Western Europe. N o doubt political pressures connected with the mid-term elections this autumn are making themselves felt. 3. In talking to Sir David Ormsby G o r e the President directed his criticism almost entirely against the French and Germans, in particular against the contrast between the rigidity of their position over Berlin negotiations and their refusal to make a military contribution which would make Mr. Khrushchev take their toughness seriously. T h e President obviously feels that Dr. Adenauer and General de Gaulle simply want to stand pat -/behind the United States build-up. We must recognise, however, that the President and most of his advisers are almost as disappointed at what seems to them the inadequacy of the British military effort as they are about the Franco-German performance. 4. President Kennedy is determined to do something but has not yet decided his plan of action. It seems that he is considering an effort to confront Dr. Adenauer with the choice between making concessions to the Russians or accepting the risk of war which would be involved in a continued policy of standing firm. This might suggest that he is willing to leave Dr. Adenauer with the choice of peace or war; but it cannot really be so. The ultimate choice must rest with the United States, and Dr. Adenauer will be aware of this. T h e defence of West Berlin has become almost as much a touchstone of United States prestige in Europe as a symbol of eventual reunification for the Germans. It must therefore be questionable whether President Kennedy will be able to force Dr. Adenauer to make a definite choice and draw the necessary consequences, even if he makes the attempt. H e tried to make Dr. Adenauer see reason in Washington last November and seemed to have had some temporary success. But, to judge from the current German attitude to the talks between Mr. Thompson, the United States Ambassador in Moscow, and Mr. Gromyko, the Soviet Foreign Minister, the effect has now largely worn off and the Germans are once more closer to the French position than to the Anglo-American. 5. If we assume that this time President Kennedy does bring effective pressure to bear on Dr. Adenauer, it is not clear what concessions he intends to make him accept. They may be over Berlin, over all-German matters or over nuclear weapons and European security. N o firm conclusion is possible from President Kennedy's reference to " New arrangements over West Berlin . . . without any serious risks to our basic interest ". It is not safe to assume that the President is now thinking 60457
A
of offering the Russians the sort of terms on sovereignty of the Deutsche Demokratische Republik, recognition of frontiers, and control of nuclear weapons which we should consider acceptable. He may not be willing to go at all as far as we should. 6. We must, I think, now wait for President Kennedy to decide how to play his hand. He is fully aware of our views on these " wider questions ", and this is ,.no! a good moment for trying to press them as British suggestions. Nor is there iany case for a British initiative to try and influence the Franco-German attitude. We must proceed cautiously both because our own position on the military build-up is a disappointment to the Americans and because good relations with our two main European allies matter very much to us for weighty reasons unconnected with Berlin. Only President Kennedy is in a position to bring pressure to bear on Dr. Adenauer. The attitude of General de Gaulle will also have to be considered. 7. The course which the Berlin crisis now takes may be determined by President Kennedy's tactics. If he prevails on Dr. Adenauer to agree to the concessions necessary in order to interest the Russians in a negotiated settlement over Berlin, and if Dr. Adenauer then gives the necessary instructions to the lower echelons on the German side who have been so obdurate up to now, we may be able to find a way forward by keeping the Thompson-Gromyko talks going for the present and having an East-West Foreign Ministers' meeting at the appropriate moment. Mr. Thompson is due to have another talk with Mr. Gromyko before long. We await draft instructions from Washington. If, on the other hand, the conclusion of the Kennedy-Adenauer dialogue were that the Western Powers should stand firm and make no concessions, we should probably wish to point out to the Americans that one could not be certain even in these circumstances that Dr. Adenauer would really refuse all concessions once negotiations were joined. He has revealed a pathological aversion in the past to showing his hand in advance of dealings with the Russians. H e stretched a few points during the Geneva Conference in 1959, however, when this was clearly the only alternative to a breakdown and when the Americans pressed him. He might do the same again, once negotiations were under way and had run into difficulties. If all efforts to find a basis for talking about Berlin to the Russians end in failure, perhaps a proposal for a Summit Meeting without agenda will offer a way out. But the time must be carefully chosen. 8. Generally speaking I think we should welcome an effort by President Kennedy to place more responsibility on the Federal German Government for the painful decisions which probably have to be faced. In the end, the Germans must say what price they are ready to pay for retaining the Western position in West Berlin. Naturally we should not want the pressure to be so strong that it drove the Germans into a reversal of their whole policy of Western alignment and caused them to make a separate deal with the Russians; but I do not think there is great danger of this. When it comes down to it, the West Germans have too much to lose to risk war for the sake of West Berlin or even for the sake of reunification, and at the final " crunch " it is likely to be they who will want to make the concessions. This being so, it would not be in the British interest to instigate prematurely a campaign of pressure upon them. 9. As a next step, and pending a reply from Mr. Khrushchev, I propose to instruct our Ambassador at Washington to find out what concessions President Kennedy considers the Germans should be ready to accept at the right time and when and how he thinks of putting these to them. The Ambassador will remind the Americans of our ideas whenever he considers that this will help. H.
Foreign Office, S.W. 1,
22nd February, 1962.
ANNEX
COPIES OF TELEGRAMS FROM H E R MAJESTY'S AMBASSADOR IN WASHINGTON
TO THE FOREIGN O F F I C E
I talked to the President about this yesterday. His concern is not that the White Paper constitutes a new defence policy, but that it is a continuation of the previous policy without sufficient consideration of the present state of the world, and in particular the serious Soviet threats over West Berlin. 2. The President himself is convinced that what caused Khrushchev to pause last autumn was his knowledge that the United States still maintained a preponderance of military might and in reply to the Russian threats during the summer had been prepared to step up its defence efforts still further. From August on the Russians had come to believe that if they pressed the West too hard over Berlin, they ran a serious risk of a major collision with a more powerful United States. This being so, the President feels that the one way to ensure an increase in tension over Berlin is for Khrushchev to be persuaded that whatever the Americans might say or do, the Europeans themselves were prepared to give way and there was a real danger that Khrushchev would come to this conclusion in view of the minimal additional effort that America's other N A T O Allies were now making in the military field. If the European nations continued to pursue a more or less business-as-usual attitude, then Khrushchev would not take seriously their tough talk about West Berlin. 3. It is fundamentally this business-as-usual approach to our defence problems that the President, McNamara and Rusk find disturbing at the present time, and, as regards details, I think they are all convinced that we cannot make an equitable and effective contribution in the conventional field without some form of selective call-up. In these circumstances I was unable to make much headway with the President over these basic worries regarding our defence policy. But I think I was able to reassure him over some of the details. 4. On the question of a build-up to meet the Berlin situation, I pointed out that legislation was at this moment going through Parliament which would enable us to retain national servicemen in the forces for an additional six months. This meant that those we retained would not be released until the autumn. This legislation would also enable us to recall reservists to the forces at very short notice in order to fill critical gaps. I also,told him that I believed we were in the process of forming a strategic reserve division in the United Kingdom which would be able to move at short notice to the Continent if a deterioration in the Berlin situation made this necessary. (I understand this to be the situation, although I can find no specific reference to it in the draft White Paper we have here.) 5. On the question of our retaining an independent nuclear deterrent throughout the 1960s, I told the President that this phrase was not an accurate summary of what would appear in the White Paper. What we did say there was that the V-bomber force, with first Blue Steel and then with Skybolt equipment, would continue to be effective throughout the 1960s and could therefore continue to make a contribution to the Wesfs nuclear deterrent over this period. N o statement was made in the White Paper that would rule out the consideration of any new arrangements which might be agreed for the deployment and control of the West's nuclear forces. 6. To sum up, my judgment would be that although the President, in company with his Chief Advisers, will continue to be privately disappointed over our defence policy, he will feel that the harm that he saw resulting from the publication of the White Paper would be considerably mitigated if we were: (a) able to stress that we were in fact taking steps in the conventional field to increase the effectiveness of our forces along the lines of my paragraph 4 above; and (b) able to make it clear t h a t our proposal to retain and to keep up to date our V-bomber force was not designed to prejudice the issue of the method of control over and deployment of nuclear weapons in the N A T O Alliance. 60457
7. I do not imagine that we wish publicly to stress unduly the effect of our balance of payments difficulties upon our defence policy, but I expect the Prime Minister will wish to deal with this aspect of the matter in his personal reply to the Presidents letter. Indeed this might be a good opportunity for driving home to him that what seriously diminishes our ability to maintain our forces on the Continent of Europe is the extent to which all the major German arms orders are scooped up by the Americans.
I saw Mr. Rusk this morning about our White P^per. I made the same points to him as I had made to the President. He said he was grateful for the explanation and said that his chief concern was that we should stress whatever we were doing specifically to make our forces more effective in the context of the Berlin situation and in the second place that we should make no statement about our nuclear weapons policy which prejudged the coming discussions in N A T O .
My discussion with the President about our defence policy led naturally into a talk about the Berlin situation. The President was clearly very dissatisfied with the present state of affairs. He had assumed that the tough, burdensome and unpopular measures taken by the United States would buy for the West a breathing space in which they could work out a negotiating position that had some chance of being acceptable to the Soviet Union. In practice, none of America's European allies who were most closely affected by the Berlin situation had made a comparable military effort. On the contrary, they had used the breathing space provided to sit tight, do nothing and hope for the best. Least of all had they shown any determination to work out a sensible negotiating position. He did not regard this as a responsible policy and he was becoming less and less convinced that any of the European nations cared enough about West Berlin to take any of the unpopular steps which would be required in order to bring about some solution to the problem. Either we must decide that there were no changes or concessions of any consequence which were acceptable to us, in which case it would be necessary for us to build up our forces and make it clear by deeds as well as words that the Russians could interfere with our position in Berlin only at their extreme peril; or we decided that we believed that new arrangements over West Berlin might be negotiated with the Russians without any serious risk to our basic interests, in which case our present approaches in Moscow were really a waste of time as no one thought for one moment that our present proposals would have any attraction for the Russians. 2. The President went on to say that apparently the French and German game was to make the Americans carry the main responsibility for the whole problem. He himself was expected either to threaten nuclear war in order to preserve the present status quo in Berlin with the fairly clear indication that if Khrushchev called his bluff he would in fact be asked not to start the war he had been threatening. Alternatively, he was expected to make concessions in order to reach an agreement with the Russians which the French and the Germans could then blame him for if the result turned out to be unsatisfactory. The President was quite clear that he was not prepared to allow this situation to continue and he believes that in Adenauer lies the key to the whole situation. He told me that he had had a long meeting with Rusk and the European experts from the State Department and he has told them that he now intends to take a personal day-to-day responsibility for handling United States policy in this field. He has not yet made up his mind of the best way to approach Adenauer, but his first thoughts are to confront him with the blunt alternatives of deciding against serious negotiations - and preparing in the last analysis to fight a war, or of deciding in favour of negotiations which have some hope of a successful outcome. Put like this, he would hope and expect that Adenauer would exert himself in favour of the second alternative. ' '-
3. I told the President that we also had grave doubts about allowing the situation to drift on in the hope that Khrushchev would decide to do nothing too unpleasant. We could not really understand the extremely negative and defensive attitude of the French and Germans who always seemed to imagine that increased contacts with the Communists would be dangerous for the West and not for the East. I thought that this was the reverse of the truth and we should not forget that the 1955 Summit, although it achieved no concrete results, did create an atmosphere of detente which was quickly followed by the rise to power of Gomulka in Poland and an anti-Communist revolution Hungary. 4. At this point I put to the President your thoughts about summitry (your telegram N o . 1375). I told him that we felt that we ought to keep in mind the possibility of a Summit meeting some time early this summer. In the meantime we should avoid saying anything which would subsequently require us to eat our words should we decide that a meeting of Heads of Government could not be avoided. The President immediately said that he would be perfectly prepared to go to a Summit meeting, but if it was to be in the disarmament context some progress must first have been made in the Geneva negotiations. He did not seem to think that there had been any marked enthusiasm for the idea of an Eighteen-Power Summit meeting. With the possible exceptions of Egypt and Burma the response from the eight neutral members of the committee had been very cautious and even Egypt and Burma had not fully committed themselves in favour of Khrushchev's proposal. He therefore saw no reason to suppose that we would be stampeded into a Summit meeting. However, he repeated that he would be perfectly happy to go if it seemed that such a meeting could do good. But he found it difficult to see how it could do any good, unless the Russians had first of all displayed some desire to talk seriously about disarmament.
C (62) 32
C O P Y NO.
0
C^
2nd M a r c h , 1962 CABINET
F A R M P R I C E R E V I E W , 1962 j U j g m o r a n d u m by t h e M i n i s t e r o£ A g r i c u l t u r e F i s h e r i e s and Food
On 6th F e b r u a r y , t h e C a b i n e t a g r e e d t h a t o u r a i m in t h e F a r m P r i c e R e v i e w s h o u l d be t o w i t h d r a w l a s t y e a r ' s i n c r e a s e of 0. 8d, p e r gallon in t h e g u a r a n t e e d p r i c e f o r m i l k and to s e c u r e s a v i n g s of £ 8 m i l l i o n on o t h e r c o m m o d i t i e s ( C . C. (62) 11th C o n c l u s i o n s , M i n u t e 6 ) A f t e r a l l o w i n g for s o m e a u t o m a t i c o r m i n o r c h a n g e s , t h e s e c u t s w o u l d r e d u c e t h e v a l u e of t h e g u a r a n t e e s b y a b o u t £14 m i l l i o n - the m a x i m u m a m o u n t p e r m i s s i b l e t h i s y e a r u n d e r t h e A g r i c u l t u r e A c t , 1957.
0
2. In a c c o r d a n c e w i t h t h e s e d e c i s i o n s , o f f i c i a l s h a v e p u t t o t h e F a r m e r s ' Unions t h e P r i c e S c h e d u l e w h i c h i s s e t out in t h e A n n e x . T h i s S c h e d u l e c o n c e n t r a t e s t h e p r i c e c u t s on m i l k , s h e e p and e g g s w h e r e t h e r e i s t h e s t r o n g e s t c a s e for c u t t i n g b a c k . F o r c a t t l e and s h e e p , we a r e a l s o i n t r o d u c i n g m o r e s t r i n g e n t s t a n d a r d s of e l i g i b i l i t y d e s i g n e d to s t r e n g t h e n t h e m a r k e t p r i c e . 3. T h e U n i o n s h a v e r e p l i e d with a P r i c e S c h e d u l e w h i c h v/ould i n c r e a s e t h e v a l u e of t h e g u a r a n t e e s by £ 2 . 7 m i l l i o n . T h i s of c o u r s e is tactics. M y g u e s s w o u l d b e t h a t t h e y w o u l d a g r e e t h e R.eview a t a d e c r e a s e of b e t w e e n £ 4 m i l l i o n a n d £ 9 m i l l i o n . Their main general arguments are: (i)
A R e v i e w of m i n u s £ 6 m i l l i o n v/ould h o l d t h e i r i n c o m e s t e a d y ; a R e v i e w of m i n u s £14 m i l l i o n would Be r e p r e s e n t e d a s a cut in t h e i r i n c o m e , n e x t y e a r c o m p a r e d w i t h t h i s y e a r , of £ 8 m i l l i o n .
(ii)
T h e y w o u l d b e p r e p a r e d to a c c e p t a " p a y p a u s e " not a " p a y c u t " for a n i n d u s t r y w h o s e i n c o m e s i n c e t h e w a r h a s a l r e a d y fallen well behind the national trend.
(iii)
In t h e White P a p e r on t h e U n i o n s ' t a l k s w i t h t h e A g r i c u l t u r a l D e p a r t m e n t s in I960 (Grand. 1249) t h e G o v e r n m e n t g a v e an a s s u r a n c e t h a t " t h e y i n t e n d , t a k i n g one y e a r w i t h a n o t h e r , t o l e a v e f a r m e r s w i t h a s h a r e of t h e gain f r o m i n c r e a s i n g efficiency". A R e v i e w of m i n u s £ 6 m i l l i o n t a k e s t h e w h o l e of t h e i r g a i n f r o m g r e a t e r e f f i c i e n c y ; a t o t a l c u t of £14 m i l l i o n v/ould t a k e a l l of t h i s a n d more.
4. An a w a r d on the l i n e s of t h e S c h e d u l e h a s t h e d r a w b a c k t h a t t h e c u t s t e n d to f a l l on t h e s m a l l e r f a r m e r s . If we w e r e to d e c i d e t o t a k e l e s s t h a n t h e m a x i m u m c u t of £14 m i l l i o n , m y i n c l i n a t i o n would be to e x t e n d t h e s c o p e of t h e S m a l l F a r m e r S c h e m e a n d / o r to t a k e s o m e w h a t l e s s off t h e m i l k p r i c e . 5. T h e m a x i m u m c u t on t h e b a s i s of w h i c h I would s e e any p o s s i b i l i t y of g e t t i n g t h e U n i o n s to a g r e e t o t h e R e v i e w w o u l d b e , s a y , £8 million. If t h i s w e r e t o b e done I w o u l d e x t e n d t h e S m a l l F a r m e r S c h e m e a t a c o s t of a b o u t £ 2 . 5 m i l l i o n a n d r e d u c e t h e p r i c e of m i l k b y 0. 4 d . i n s t e a d of 0. 8d In t h i s way we w o u l d be r e d u c i n g t h e e s t i m a t e of E x c h e q u e r c o m m i t m e n t (including doing away with the E x c h e q u e r subsidy on m i l k ) by a t l e a s t £14 m i l l i o n at t h i s R e v i e w a s o p p o s e d t o a b o u t £16 m i l l i o n u n d e r t h e full cut, 0
6.
I w o u l d b e g l a d of m y c o l l e a g u e s ' d e c i s i o n o n : (i)
W h e t h e r we s h o u l d i n s i s t on t h e full cut of £14 m i l l i o n in t h i s y e a r s R e v i e w . !
(ii)
W h e t h e r I s h o u l d t r y to r e a c h a g r e e m e n t w i t h t h e F a r m e r s ' U n i o n s on a c u t of around £ 8 million.
C.S.
M i n i s t r y of A g r i c u l t u r e , a n d F o o d , S. W. 1.
Fisheries
2nd M a r c h , 1962.
-2
P R O P O S E D CHANGES IN P R I C E G U A R A N T E E S AND
P R O D U C TION G R A N T S
SCHEDULE
Guar anteed Prices determined a t 1961 R e v i e w
Change
Value £ million
No c h a n g e
cwt.
26s. lid.
cwt.
21s.
7d.
No c h a n g e
cwt.
27s.
7d.
No c h a n g e
Oats and M i x e d Corn
cwt.
27s.
5d.
No c h a n g e
Potatoes
ton
265 .
Od.
No c h a n g e
Sugar beet
ton
128s.
Od.
No c h a n g e
.Cattle
live cwt.
167 s.
Od.
No c h a n g e
Pigs
s c o r e d. w,
43s.
7d.
Sheep
l b . e s t , d. c, w.
3s.
3d.
Wool
lb.
4 s . 5. 25d.
Milk
gallon
3 s . 2 . 25d.
-
0. 8d.
- 6.779
E g g s (Hen)
doz.
3s. 8.63d.
-
1.5d.
- 5.189
s
No c h a n g e -
Id.
- 2.146
No c h a n g e
A d j u s t m e n t s in t h e s t a n d a r d of eligibility" t o s u b s i d y f o r cattle, sheep and pigs
- 1. 840
M i l k - a d d i t i o n of 2 4 . 6 m i l l i o n gallons to " s t a n d a r d quantity"
* 2.177
P R O D U C T I O N GRANTS Net effect of m i s c e l l a n e o u s charges
- 0*417 T O T A L CHANGE
-14. 194
IS DOCUMENT IS T H E P R O P E R T Y O F H E R B R I T A N N I C M A J E S T Y'S G O V E R N M E N T ;
C O P Y NO.
C. 162)33
d
27th F e b r u a r y , 1962
CABINET
T H E E F F E C T ON H O U S E H O L D E R S O F R E V A L U A T I O N
F O R R A T E S IN 1963
i
M e m o r a n d u m b y t h e M i n i s t e r of H o u s i n g a n d L o c a l G o v e r n m e n t a n d M i n i s t e r for W e l s h A f f a i r s
T h e r e w e r e w i d e s p r e a d f e a r s t h a t t h e r e v a l u a t i o n for r a t e s in 1963 would r e s u l t in an i n t o l e r a b l e shift of r a t e b u r d e n on to h o u s e holders. A c c o r d i n g l y , t h e R a t i n g a n d V a l u a t i o n A c t , 1961, gave m e p o w e r b y o r d e r for t h e p e r i o d of t h e n e x t v a l u a t i o n l i s t s t o d e - r a t e d w e l l i n g s (but n o o t h e r c a t e g o r y of p r o p e r t y , e x c e p t d w e l l i n g s combined with other p r o p e r t i e s ) to the extent c o n s i d e r e d n e c e s s a r y . D e c i s i o n s on t h i s a r e now n e c e s s a r y s o t h a t t h e v a l u a t i o n c a n b e completed. 2. An e s s e n t i a l p r e l i m i n a r y , w h i c h t h e H o m e A f f a i r s C o m m i t t e e a g r e e d on 21st F e b r u a r y , i s t o p r o v i d e a n e w s c a l e of d e d u c t i o n s f r o m g r o s s t o r a t e a b l e v a l u e to t a k e a c c o u n t of t h e i n c r e a s e d c o s t of r e p a i r s . An e q u i t a b l e b a s i s f o r t h i s h a s b e e n s e t t l e d a f t e r c o n s u l t a t i o n w i t h t h e p r o f e s s i o n a l b o d i e s c o n c e r n e d w i t h r a t i n g a n d t h e a s s o c i a t i o n s of l o c a l authorities. It w i l l r e q u i r e a n a f f i r m a t i v e o r d e r , 3. A f t e r t a k i n g a c c o u n t of t h e p r o p o s e d n e w s c a l e of d e d u c t i o n s a n d of c h a n g e s in r a t e - d e f i c i e n c y g r a n t s w h i c h r e s u l t f r o m t h e r e v a l u a t i o n , t h e e s t i m a t e s for t h e c o u n t r y a s a whole s h o w no i n c r e a s e at a l l in t h e s h a r e of r a t e s b o r n e b y h o u s e h o l d e r s . T h e r e is p o w e r to m a k e a d i f f e r e n t i a l o r d e r for i n d i v i d u a l c o u n t i e s and c o u n t y b o r o u g h s . In no a r e a i s t h e r e e x p e c t e d t o b e a n i n c r e a s e in t h e h o u s e h o l d e r s s h a r e of t h e s o r t of a m o u n t (33-f-per c e n t ) w h i c h m y p r e d e c e s s o r t o l d t h e H o u s e w o u l d be i n t o l e r a b l e and would entail a h o u s e d e - r a t i n g o r d e r . The highest i n c r e a s e i s a b o u t 27 p e r c e n t ( B o u r n e m o u t h ) and t h e n e x t h i g h e s t i s a b o u t 20 p e r c e n t ( B l a c k p o o l ) . T h e p o s i t i o n for e a c h a r e a i s s e t out in. A p p e n d i x III of t h e a t t a c h e d d r a f t White P a p e r . 1
4. One f e a t u r e i s c o m m o n t o t h e s e a s i d e p l a c e s w h i c h t o p t h e l i s t , n a m e l y t h a t h o t e l s and b o a r d i n g h o u s e s a r e n o t doing p a r t i c u l a r l y w e l l , v/hich i s one r e a s o n f o r t h e r e l a t i v e l y l a r g e i n c r e a s e of t h e s h a r e of b u r d e n b o r n e by the h o u s e s . T o m a k e a d e - r a t i n g o r d e r for t h e s e a r e a s would t h r o w b a c k p a r t of t h e b u r d e n on to t h e h o t e l s , a n d m u c h i n c r e a s e t h e b u r d e n on t h e s m a l l a m o u n t of l o c a l i n d u s t r y . It would a l s o d i s t u r b t h e b a s i s on w h i c h R i v e r B o a r d and o t h e r c o m m o n e x p e n s e s are shared. A n y d e - r a t i n g o r d e r w o u l d b e a d e f e r m e n t of t h e r e t u r n
16i
t o a fully e q u i t a b l e b a s i s for t h e r a t i n g s y s t e m in r a t i n g a l l l i a b l e p r o p e r t i e s at the full a n d on c u r r e n t v a l u e s . No o r d e r s e e m s to b e necessary. 5. T h e r e i s a g e n e r a l a w a r e n e s s t h a t t h e t i m e f o r d e c i s i o n on these matters is r i p e . T h e r e i s a good d e a l of p u b l i c a l a r m v/hich s h o u l d not b e a l l o w e d t o b e u s e d t o o u r d i s a d v a n t a g e . We n e e d t o e x p l a i n the b a s i s f o r t h e n e w o r d e r for s c a l e s of d e d u c t i o n f r o m g r o s s v a l u e and t h e e s t i m a t e s w h i c h s h o w t h a t a d e - r a t i n g o r d e r i s n o t necessary. T h e a t t a c h e d d r a f t White P a p e r i s d e s i g n e d for t h i s purpose.
C.H.
M i n i s t r y of H o u s i n g a n d L o c a l Government, S.W.1, 2 7 t h F e b r u a r y , 1962.
-2
Draft Revaluation The R a t e A*
Statutory
White for
Liability
deduc t i o n s
Paper
Rates of
for
the
in
1963
Householder
repairs,
etc.
1. R a t e s are l e v i e d , at the r a t e i n t h e £ f i x e d by t h e r a t i n g a u t h o r i t y , on t h e r a t e a b l e v a l u e of e a c h r a t e a b l e p r o p e r t y i n the r a t i n g area. The r a t e a b l e v a l u e o f t h e p r o p e r t y i s e i t h e r t h e same a s i t s net, a n n u a l v a l u e c r , f o r t h e t i m e b e i n g , (because of d e r a t i n g ) , a proportion of that v a l u e . . U n l e s s an order d e r a t i n g h o u s e s i s made, i n t h e v a l u a t i o n l i s t s w h i c h a r e d u e t o come i n t o f o r c e o n 1 s t A p r i l 1 9 6 3 t h e r a t e a b l e v a l u e s o f a l l p r o p e r t i e s w i l l b e t h e same a s t h e i r n e t a n n u a l v a l u e s . 2. In broad terms, the net annual value of a property is e q u i v a l e n t to the rent at which i t might r e a s o n a b l y be e x p e c t e d to l e t from year to year i f the t e n a n t were r e s p o n s i b l e f o r r e p a i r s , i n s u r a n c e and o t h e r m a i n t e n a n c e e x p e n s e s . F o r some types of p r o p e r t y , i n p a r t i c u l a r f a c t o r i e s , p u b l i c u t i l i t y u n d e r t a k i n g s , and l a n d w i t h or w i t h o u t a n c i l l a r y b u i l d i n g s , the net annual value i s estimated d i r e c t . But f o r most p r o p e r t i e s , i n c l u d i n g h o u s e s , s h o p s , o f f i c e s , h o t e l s , and o t h e r n o n i n d u s t r i a l b u i l d i n g s , a g r o s s v a l u e must f i r s t be found. The gross v a l u e i s the r e n t at which the p r o p e r t y might r e a s o n a b l y be e x p e c t e d to l e t from y e a r t o y e a r i f t h e l a n d l o r d w e r e r e s p o n s i b l e f o r r e p a i r s , i n s u r a n c e and m a i n t e n a n c e " . The n e t annual v a l u e i s obtained by d e d u c t i n g from the g r o s s v a l u e , in a c c o r d a n c e w i t h s c a l e s l a i d down b y s t a t u t e , a sum r e p r e s e n t i n g the n o t i o n a l c o s t of r e p a i r s , i n s u r a n c e and m a i n t e n a n c e . The p r e s e n t s c a l e s h a v e n o t b e e n a l t e r e d s i n c e 1928: t h e R a t i n g and V a l u a t i o n ( M i s c e l l a n e o u s P r o v i s i o n s ) A c t , 1955 e m p o w e r s t h e M i n i s t e r t o v a r y them by o r d e r . 3. I n 1 9 5 1 , a f t e r a s u r v e y o f t h e r e c o r d s r e l a t i n g t o many thousand-s o f h o u s e s , the R o y a l I n s t i t u t i o n of C h a r t e r e d S u r v e y o r s e x p r e s s e d i t s e l f s a t i s f i e d t h a t i n 1939 t h e a c t u a l e x p e n d i t u r e on r e p a i r s , i n s u r a n c e and m a i n t e n a n c e w a s , on a v e r a g e , about equal t o , or s l i g h t l y i n e x c e s s of, the r e l e v a n t statutory deduction. I n 1 9 5 3 , t h e G i r d w o o d C o m m i t t e e o n "The c o s t of house maintenance" e s t i m a t e d t h a t i f the c o s t of m a i n t a i n i n g a h o u s e w a s p u t a t 100 i n 1 9 3 9 , t h e c o s t - o f d o i n g t h e same a m o u n t o f w o r k i n 1 9 5 3 w a s 3 1 6 . An e x t e n s i o n , o f t h e c a l c u l a t i o n s used for the Committee's r e p o r t s u g g e s t s t h a t the p r e s e n t - d a y c o s t o f s i m i l a r w o r k i s i+52. 4. It i s estimated that the v a l u e s o f h o u s e s b e t w e e n 1939 and 1963 g e n e r a l r e v a l u a t i o n s f o u r t i m e s t h e 1939 f i g u r e .
average increase in the gross and 1963 a s a r e s u l t o f t h e 1956 a l o n e w i l l b r i n g them t o a b o u t ' :
5T a k i n g t h e s e f a c t s i n t o a c c o u n t , and a f t e r consultation with professional associations concerned with rating, the a s s o c i a t i o n s o f l o c a l a u t h o r i t i e s and t h e London C o u n t y C o u n c i l , the M i n i s t e r has d e c i d e d to a l t e r the s c a l e w i t h the broad object of securing that houses which w i l l have gross v a l u e s about four times the e a r l i e r f i g u r e s h a l l have a s t a t u t o r y deduction t i m e s a s l a r g e i n 1963 a s i n 1939
- 1
6. The property continue together
present scale applies equally to all types of
assessed to gross value; and it is proposed to
this. The proposed scale is reproduced in appendix I
with the existing provisions.
7. The scale, is intended to apply throughout England and Wales.
At present the scale for the administrative county of London is
at certain points different from that for other areas. The
difference affects gross values between £21 and £121 and is at
most £4- It is historical in origin and, so far as is known,
has never been related to any difference in the cost of repairs,
etc., within and outside London. The difference has particularly
unfair effects at the boundary of the administrative county,
where adjacent and identical houses, each of which may be liable
for the same water rate and police rate, may as a result have
different rateable values. To compensate to some extent for the
assimilation of the two scales, the new scale has been designed
to produce deductions midway between the.figures which the
former separate scales would have produced.
8. Some illustrations of the effects of the scale are in appendix II. B.
Effect of revaluation on householders
9, The Valuation Office of the Board of Inland Revenue have
provided estimates of the aggregate values of pr operty as they
are expected to appear in the new lists in 1963, so that the
position of householders can be considered. The estimates
have been .made so that like can be compared with like. The
figures for the 1963 lists have been adjusted to take account
of the estimated effect of applying the scale of statutory
deductions proposed above; and an estimate has been made of
the effect of the revaluation upon the percentag es of rate deficiency grant payable to counties and county boroughs .
Appendix III shows the estimated change in the h ouseholders'
share of the expenses when account has been take n of these
changes. The headnote to appendix III explains the main
assumptions made in the various calculations whi eh have led up
to the figures which it contains.
10. For the country as a whole the percentage change in share
of burden of rates (after taking into account estimated change'
in rate-deficiency grants) can broadly be expressed as follows
Houses
Dwellings combined with other properties
16
Industry and freight transport
+
k3
Electricity gas, water and Crown
2k
Shops,.. Of f ices Other and other . proper properties'"-, ties assessed to assessed gross value direct . to net annual value (sports grounds, etc. ) - 13 . - 35
A rise in rateable values at a revaluation does not necessarily mean any rise at all in the rates paid by an individual. The total amount to be raised from rates is settled by the local council. Rat eable values are merely a method of sharing this total bill am ongst the ratepayers; and, if rateable values generally ris e, the poundage of rate correspondingly falls. For the individua 1 householder, it is the relationship of his rating assessment to the total which matters - hence this attention to the share whi ch householders are likely to bear after revaluation.
11. I t w i l l be s e e n f r o m t h e f i g u r e s i n a p p e n d i x I I I t h a t f o r England and W a l e s a s a w h o l e t h e c h a n g e i n t h e h o u s e h o l d e r s ' share i s n e g l i g i b l e . l o r i n d i v i d u a l c o u n t i e s and c o u n t y b o r o u g h s t h e c h a n g e s may b e s u m m a r i s e d a s f o l l o w s ; " ,
Change
in householders' share
(D Decrease
No. of county boroughs
No.
of c o u n t i e s and county boroughs
(2)
(3)
Ik)
5
17
7 6 15 18
12 10 27 35
1
2
2
5 7
3 7 13 33
of
1 6fo o r m o r e 11$ t o 15$ S /o t o 10 / Y/o t o 5 /o
k
0
0
12
0
a
No
No. of counties
change
Increase
of
0
1 6 /o o r m o r e 11$ t o 15$ t o 10fc 1 to 5$
6fo
6 14
19
12. S e c t i o n 2 of t h e E a t i n g and V a l u a t i o n A c t , 1961 e n a b l e s t k e M i n i s t e r by Order f o r t h e p e r i o d of t h e f o r t h c o m i n g v a l u a t i o n l i s t s t o reduce t h e r a t e a b le v a l u e of p r o p e r t i e s w h o l l y or p a r t l y used as d w e l l i n g h o u s e s i f he c o n s i d e r s t h a t t h e i r change i n t h e s h a r e o f r a t e b u r d e n i s mor e t h a n t h e y c a n r e a s o n a b l y be e x p e c t e d t o bear. Such an Order c o u l d i f n e c e s s a r y make d i f f e r e n t provision f o r t h e s e v e r a l c o u n t i e s and c o u n t y b o r o u g h s , a l t h o u g h i t w a s made p l a i n t h a t any such di f f e r e n t i a t i o n might cause g r e a t difficulties, There i s no power t o g i v e any s u c h r e l i e f , e i t h e r u n i f o r m l y or o t h e r w i s e , t o o t h e r cl a s s e s of r a t e p a y e r s . 13Upon t h e a b o v e e s t i m a t e s o f t h e r e v a l u a t i o n t h e r e i s c l e a r l y no c a s e for the country as a whole.
l i k e l y r e s u l t s of the w h a t e v e r f o r m a k i n g an
Order
14. I t w o u l d be w i t h i n t h e M i n i s t e r ' s p o w e r s t o make an Order d e r a t i n g h o u s e s s o l e l y i n t h o s e few a r e a s where t h e increas"e i n the householders share i s g r e a t e s t , a l t h o u g h none of them r e a c h e s the figure which the then M i n i s t e r gave t o Parliament as c l e a r l y warranting the making of an Order. 1
15. S p e c i a l l o c a l c i r c u m s t a n c e s d o u b t l e s s have t h e i r i n f l u e n c e i n some o f t h e s e a r e a s . B u t o n e common f a c t o r i s c l e a r l y t h a t t h e y a l l c o n t a i n o t h e r c a t e g o r i e s o f r a t e p a y e r s who a r e n o t e c o n o m i c a l l y strong. To d e r a t e h o u s e s i n t h e s e a r e a s a n d t h u s s h i f t o n t o o t h e r s p a r t of t h e h o u s e b u r d e n w o u l d be t o d e p r i v e t h e s e o t h e r c a t e g o r i e s of a measure of r e l i e f which t h e i r economic s i t u a t i o n warrants. I t would a l s o d i s t u r b t h e b a s i s of c o n t r i b u t i o n t o R i v e r B o a r d s and o t h e r j o i n t authorities. 16. The d e c l a r e d - o b j e c t i v e i n r a t i n g v a l u a t i o n i s t o s e c u r e t h a t a l l p r o p e r t i e s l i a b l e f o r r a t e s a r e r a t e d upon c u r r e n t v a l u e s and at the f u l l . Any d e r a t i n g o r d e r f o r h o u s e s w o u l d be a p o s t p o n e m e n t of t h a t o b j e c t i v e . Upon t h e ; e s t i m a t e s of the l i k e l y r e s u l t s of r e v a l u a t i o n t h e Government c o n c l u d e t h a t no d e r a t i n g o r d e r w o u l d be j u s t i f i e d .
- 3 S E 0 R E T
jlpo^MOT:: I
LT3
CO Scales
At p r e s e n t
in
of
Deduction
force
Proposed -
Leduci;ion Gross
value
London
(2)
(D Not e x c e e d i n g
outside
£15
40/* o f t h e . g r o s s
in
London
Gross
(3) value
40^o o f t h e g r o s s
value
Seduction
(4) value
Not
exceeding
(5) £55
las, UJ ^ e x c e e d i n g £15 b u t n o t e x c e e d i n g £20 y m m E x c e e d i n g £20 b u t n o t e x c e e d i n g £40
E x c e e d i n g £40 b u t n o t e x c e e d i n g £100
Exceeding
£100
£ 6 t o g e t h e r w i t h 30;i o f t h e amount b y w h i c h t h e g r o s s v a l u e e x c e e d s £15
£ 6 t o g e t h e r w i t h 30?b o f t h e amount by w h i c h t h e g r o s s v a l u e e x c e e d s £15
£ 7 , o r 25% o f t h e g r o s s value, whichever i s the greater
£ 7 t o g e t h e r w i t h 25$ o f t h e amount by w h i c h t h e g r o s s v a l u e e x c e e d s £20
£ 1 0 , o r 20'fo o f t h e g r o s s value, whichever i s the - greater £20 t o g e t h e r w i t h 16 2 / 3 $ o f t h e a m o u n t by w h i c h t h e g r o s s v a l u e e x c e e d s £100
45'/£ o f t h e value
gross
u
-
£12 t o g e t h e r w i t h 20$ o f t h e amount b y w h i c h the gross value e x c e e d s £40
E x c e e d i n g £55 but n o t e x c e e d i n g £430
£25 t o g e t h e r w i t h 20;. o f t h e a m o u n t by which t h e g r o s s v a l u e e x c e e d s £55
£24, or £20 t o g e t h e r w i t h 16 2 / 3 / i o f t h e amount by w h i c h t h e gross value exceeds £100, w h i c h e v e r i s t h e greater
Exceeding
£100 - t o g e t h e r w i t h 16 2 / 3 ^ o f t h e a n ' t . by w h i c h t h e gross value e x c e e d s £430
£430
SECRET
APPENDIX
II
E x a m p l e s of t h e s t a t u t o r y d e d u c t i o n s on t h e new s c a l e compared w i t h t h e p r e - w a r d e d u c t i o n s , f o r p r o p e r t y w i t h a g r o s s v a l u e i n t h e 1363 l i s t s o f f o u r t i m e s i t s v a l u e i n t h e l i s t s i n 1939-
Lists
in force
in
1963 lists
1939
Statutory deduction Gross value
(D
Out s i d e London (2)
In London (3)
Gross
vaiue
(k)
Statutory deduction on new scale (5)
£
10
4
4
25
7
8
50
10
14
75
15
19
100
20
24
U
00
94
1 25
24
2k
500
112
150
28
28
600
128
175
33
33
700
145
200
37
37
800
162
kO 100
200
300
18
34
54
74
:
167
APPENDIX: I I I Effect
of r e v a l u a t i o n in different
on h o u s e h o l d e r s areas
Approximate change i n h o u s e h o l d e r s s h a r e of e x p e n s e s a f t e r t a k i n g a c c o u n t of p r o b a b l e r a t e deficiency grants
(D E n g l a n d and
(2) Wales
A d m i n i s t r a t i v e ' 0 ount i e s Bedford Berkshire Buckingham Cambridge Chester Cornwall
. .
K Cumberland
Derby Devon Dorset Durham
Essex
* . 'H* * +
+ 4
Gloucester Hampshire Hereford
Hertford a Huntingdon
I s l e of E l y
4-
I s l e of W i g h t Kent Lancaster Leicester Lincoln:
P a r t s of H o l l a n d
K P a r t s of K e s t o v e n P a r t s of L i n d s e y
4-
1
4 3
1
4 1 1 8
7
7 8 10
4-
4
4
2 7
4-
-
44-
44-
+
s
4
-
-
Suffolk East 55 S u f f o l k West Surrey Sussex East S u s s e x West
1
7 13 3 2
4
4
K Oxford 55 R u t l a n d
Salop S o k e of P e t e r b o r o u g h Somerset Stafford
2 7 7 2
4-
4-
London Middlesex Norfolk Northampton Northumberland Nottingham
1 1 1
8 11
1
1 1
2 18
9 2 5 6
1
(1) Admiaistrative (continued)
Counties
Warwick Westmorland s Wilts Worcester Yorkshire; East Riding North Riding West R i d i n g
k 11 + 1 5 ' 8 6
9
Anglesey
Brecknock
Caernarvon
Cardigan
Carmarthen
7 7 17 21 10
Denbigh
Flint
Glamorgan
Merioneth
Monmouth
k 3
15 1
Montgomery
Pembroke
s Radnor Isles
of
14
16
21
Scilly
County Boroughs
4-
18
1
Barnsiey
Barrow-in-Furness
Bath
Birkenhead
Birmingham
-
9
-
12 8 7 8
Blackburn
Blackpool
Bolton
Bootlo
Bournemouth
- 17 + 20 & 2 k * 27
Bradford
Brighton
Bristol
Biirnley
Burton-upon-Trent
- 10 + 15
Bury
Canterbury
Carlisle
Chester
Coventry
-f
-
1k
18 3
8 3 1 3 7
County Boroughs X continued; Croydon Darlington Derby Dewsbury Doncaster
r 2
*
9 " '9 4- 7
^
Dudley Last bourne E a s t Ham ' Exeter Gateshead
. - . .
Gloucester Great Yarmouth Grimsby Halifax Hastings .
* 2 4 15 * 3 " f
1
- 16 * 2 * 3 . . - 24 * 1
Huddersfield Ipswich Kingston upon H u l l Leeds Leicester Lincoln Liverpool Manchester Mi d d l e s b r o u g h N e w c a s t l e upon Tyne
0
" -
4 8 10 1
-
3 3 + 10 * 4 -K 9
Northampton Norwich Nottingham Oldham Oxford
+ 4-
Plymouth Portsmouth Preston Reading Rochdale
9 3 -f- 4 * 5 - 11
Rotherham St. Helens Salford Sheffield Smethwick
- 11 * 8 1 5
Southampton S o u t h e nd - o n - So a South-port South"Shields Stockport
4 5 + 13 2 + 13
4-
4-
4 6 1 9 5
SECRET
1
Approximate change i n h o u s e h o l d e r s " s h a r e of e x p e n s e s a f t e r t a k i n g a c c o u n t of p r o b a b l e r a t e deficiency grants (2)
'
(D
.
Cbunty Boroughs ( cont inuedj Stoke-on-Trent Sunderland
Tynemouth
Wakefield
Wallasey
-
2
-
1
-
11
-
3
Walsall Warrington West Bromwich W e s t Ham
West H a r t l e p o o l
-
5
-*r
6
* k - 21
-
k
Wigan
W o l v c r h a m p t on Worcester York
-
13 7 15
Cardiff
M e r t h y r Tydf:
Newport Swansea
+
-k
+
3
Notes, 1. The c h a n g e i n s h a r e h a s b e e n c a l c u l a t e d b y e x p r e s s i n g t h e t o t a l r a t e a b l e v a l u e o f h o u s e s a s a p e r c e n t a g e of t h e t o t a l r a t e a b l e v a l u e of t h e a r e a , b o t h b e f o r e a n d a f t e r t h e 1 9 6 3 revaluation. The p e r c e n t a g e w h i c h t h e d i f f e r e n c e constitutes of t h e s h a r e b e f o r e t h e r e v a l u a t i o n i s t a k e n a s t h e c h a n g e i n s h a r e ( f o r e x a m p l e s , i f h o u s e r a t e a b l e v a l u e s c o n s t i t u t e d 50$ of t o t a l r a t e a b l e v a l u e b e f o r e t h e 1 9 6 3 r e v a l u a t i o n , a n d 5 2 $ a f t e r , t h e c h a n g e i n s h a r e w o u l d be + kfii if the house p r o p o r t i o n h a d f a l l e n t o klfo, t h e c h a n g e i n s h a r e w o u l d be - 6fo) 2. The e s t i m a t e s of t o t a l r a t e a b l e v a l u e s h a v e b e e n f o u n d e d upon f i g u r e s f o r p r o p e r t i e s s o f a r v a l u e d by V a l u a t i o n O f f i c e r s f o r t h e p u r p o s e s o f t h e 1963 V a l u a t i o n L i s t . Properties c o m p l e t e d a f t e r 1 s t A p r i l 1961, and a l s o p r o p e r t i e s d e m o l i s h e d since t h a t date have been l e f t o u t . 3.. Certain properties are not subject to revaluation in the normal way. For t h e p u r p o s e of t h e s e c a l c u l a t i o n s , adjustments t o t h e i r v a l u e s h a v e b e e n made a s f o l l o w s : ( a )
water hereditamentss t h e f o r m u l a i n p a r a g r a p h k of t h e S e c o n d S c h e d u l e t o t h e R a t i n g and V a l u a t i o n A c t , 1961' h a s b e e n f o l l o w e d a s f a r a s p r a c t i c a b l e ; - k
-
SECRET
( b )
gas and e l e c t r i c i t y h e r e d i t a m e n t s : adjustments.will be n e c e s s a r y b y o r d e r r e q u i r i n g a f f i r m a t i v e r e s o l u t i o n of b o t h H o u s e s o f P a r l i a m e n t . Consultations about these adjustments are i n progress. For p r e s e n t p u r p o s e s i t h a s b e e n a s s u m e d t h a t t h e same b a s e s of a d j u s t m e n t a s s t a t u t o r i l y a p p l i e s t o w a t e r u n d e r t a k e r s w i l l be u s e d .
( c )
Crown p r o p e r t i e s a r e r e v a l u e d a f t e r t h e new l i s t s a r e a v a i l a b l e , t h e c o n t r i b u t i o n s i n l i e u of r a t e s b e i n g a d j u s t e d r e t r o s p e c t i v e l y w h e n t h e new v a l u e s have b e e n d e t e r m i n e d . . . Por t h e p u r p o s e of t h e s e c a l c u l a t i o n s i t has been assumed t h a t p r o p e r t i e s o c c u p i e d f o r t h e p u r p o s e s o f . t h e Crown w i l l i n c r e a s e i n v a l u e i n t h e same p r o p o r t i o n a s o t h e r c o r r e s p o n d i n g p r o p e r t i e s i n t h e same a r e a .
I n some a r e a s t h e s e t h r e e c a t e g o r i e s of p r o p e r t y a c c o u n t f o r a s u b s t a n t i a l p r o p o r t i o n of t h e t o t a l . I n t h o s e marked w i t h an a s t e r i s k the p r o p o r t i o n i n the c u r r e n t l i s t s exceeds 20$. k. C o n s u l t a t i o n s a r e i n p r o g r e s s w i t h t h e N a t i o n a l Coal Board and t h e l o c a l a u t h o r i t y a s s o c i a t i o n s a b o u t t h e p r e s c r i p t i o n u n d e r s e c t i o n 3 o f t h e A c t of 1961 of a new m e t h o d o f v a l u i n g the Board s p r o p e r t y . That p r o p e r t y i s o m i t t e d from b o t h p r e and p o s t - v a l u a t i o n t o t a l s . 1
5. R a t e - d e f i c i e n c y g r a n t i s p a y a b l e t o t h e c o u n c i l s of c o u n t i e s a n d c o u n t y b o r o u g h s w h o s e -penny r a t e p r o d u c t p e r h e a d of p o p u l a t i o n ( w e i g h t e d , i n t h e c a s e o f c o u n t i e s , , f o r , s p a r s i t y ) i s b e l o w t h e n a t i o n a l a v e r a g e . : The e f f e c t , . i n g e n e r a l t e r m s , i s t h a t i n a county or county borough q u a l i f y i n g for g r a n t t h e Exchequer s t a n d s i n a s an a d d i t i o n a l r a t e p a y e r i n r e s p e c t of t h e d e f i c i e n c y of r a t e r e s o u r c e s i n t h e a r e a . The r e v a l u a t i o n w i l l a l t e r t h e d e g r e e of g r a n t a s s i s t a n c e , i f a n y , g i v e n t o individual areas. In the present calculations rate-deficiency g r a n t s h a v e b e e n c a l c u l a t e d by r e f e r e n c e t o r a t e a b l e v a l u e s p e r h e a d of p o p u l a t i o n b e f o r e and a f t e r t h e 1 9 6 3 r e v a l u a t i o n ( t h e r e b e i n g no i n f o r m a t i o n a b o u t p e n n y r a t e p r o d u c t a f t e r r e v a l u a t i o n ! and t h e c h a n g e i n t h e p e r c e n t a g e " o f . g r a n t h a s b e e n taken i n t o account i n a s s e s s i n g the changes i n t h e h o u s e h o l d e r s ' :
share.-
:,
:
. / - - . : - : ; '
..-rv;.
6 . I t w i l l - b e a p p a r e n t from t h e s e n o t e s t h a t -the c h a n g e s can o n l y be a p p r o x i m a t i o n s . :
5-
SECRET
:-y ;
estimated
COPY NO. S 6
C. (62) 34
CABINET
REVISION O F M A C H I N E R Y F O R T H E S E T T L E M E N T "OF T E A C H E R S ' R E M U N E R A T I O N ^
T h e E c o n o m i c P o l i c y C o m m i t t e e a t t h e i r m e e t i n g on 14th F e b r u a r y , a s k e d m e to s u b m i t t o t h e C a b i n e t t h e p r o p o s a l for p o s t p o n i n g l e g i s l a t i o n d e s i g n e d t o z-evise t h e B u r n h a m m a c h i n e r y s e t out in t h e a t t a c h e d p a p e r . 2. T h e s h o r t p o i n t i s t h a t a B i l l to g i v e t h e M i n i s t e r p o w e r s to p r e s c r i b e s c a l e s in t h e e v e n t of d e a d l o c k b e t w e e n t h e two s i d e s of t h e C o m m i t t e e o r to r e v i s e a n a g r e e d s e t t l e m e n t r e c o m m e n d e d b y t h e m (he now h a s only a p o w e r of v e t o ) would m e e t g r e a t o p p o s i t i o n f r o m t h e t e a c h e r s , a n d the l o c a l a u t h o r i t i e s a r e p l e d g e d t o s u p p o r t t h e t e a c h e r s if t h e B i l l i s i n t r o d u c e d b e f o r e t h e G o v e r n m e n t s l o n g - t e r m p o l i c y on i n c o m e s h a s b e e n m o r e fully w o r k e d o u t . 3. After t h i s h a s b e e n d o n e I c o n s i d e r I c o u l d g e t t h e B i l l with m u c h l e s s o p p o s i t i o n , p a r t i c u l a r l y f r o m t h e l o c a l a u t h o r i t i e s . P o s t p o n e m e n t would a l s o v e r y m u c h s t r e n g t h e n t h e i n f l u e n c e of t h e m o d e r a t e s on t h e N a t i o n a l Union of T e a c h e r s . 4. In the m e a n t i m e I can - a n d w i l l - u s e m y p o w e r of v e t o if, d u r i n g the s u m m e r , t h e C o m m i t t e e p u t t o m e a r e c o m m e n d a t i o n t h a t I cannot a p p r o v e .
D. E .
M i n i s t r y of' E d u c a t i o n , 16th F e b r u a r y , 196 2
W.I.
ANNEX
REVISION OF MACHINERY FOR THE SETTLEMENT OF TEACHERS' REMUNERATION Memorandum by M i n i s t e r of Education At t h e i r meeting on 2nd October l a s t the Economic P o l i c y Committee agreed t h a t t h e M i n i s t e r of Education should seek powers t o enable him t o p r e s c r i b e s a l a r y s c a l e s f o r t e a c h e r s i f the Burnham Committee were unable t o r e a c h agreement o r , a f t e r the M i n i s t e r had r e f e r r e d back t o them with h i s reasons a recommendation he could not a c c e p t , r e - s u b m i t t e d an unac c e p t a b l e agreement. 2. S h o r t l y a f t e r w a r d s the Burnham Committee agreed t o recommend s c a l e s of pay w i t h i n t h e l i m i t s I had s e t , b u t I s t i l l thought i t wise t o give t h e House, during t h e Debate on t h e Address on 3 r d November, a broad i n d i c a t i o n of my p r o p o s a l s f o r l e g i s l a t i o n , as i t seemed more l i k e l y t h a n not t h a t we should need t o go ahead w i t h i t . 3. My p r o p o s a l s have now been d i s c u s s e d s e p a r a t e l y w i t h t h e a s s o c i a t i o n s of l o c a l a u t h o r i t i e s and t e a c h e r s and an i m p o r t a n t new f a c t o r has been i n t r o d u c e d . I f we p r e s s our l e g i s l a t i o n the t e a c h e r b w i l l demand t h a t a provisi&n f o r ^ a r b i t r a t i o n between t h e two s i d e s of the Burnham Committee should be i n c l u d e d . The l o c a l a u t h o r i t i e s have s a i d t h a t while t h i s would not be welcome t o them they could not p o s s i b l y oppose i t . The (government might a l s o f i n d i t diffi& u l t t o oppose i t , having r e g a r d t o our r e c e n t s t a t e m e n t s about t h e v a l u e of a r b i t r a t i o n , 4. But t o i n s e r t a r b i t r a t i o n i n t o t h e Burnham machinery f o r t h e f i r s t time when t h e n a t i o n a l p o l i c y on incomes is s t i l l jn the melting pot would i n my view be a m i s t a k e . The o b j e c t of a reform i n Burnham i s t o b r i n g the n a t i o n a l i n t e r e s t more c l e a r l y and f r u i t f u l l y i n t o the p i c t u r e and t h e A u t h o r i t i e s and t h e t e a c h e r s have s a i d t h a t t h e y will oppose l e g i s l a t i o n u n t i l t h e y see how i t f i t s i n w i t h t h e new n a t i o n a l a r r a n g e m e n t s . I b e l i e v e t h e r e f o r e t h a t ' i t would be b e t t e r to postpone l e g i s l a t i o n u n t i l t h e n a t i o n a l p o l i c y has been more f u l l y worked o u t . This would mean t h a t a n e g o t i a t i o n on s a l a r i e s t h i s summer, which t h e Local A u t h o r i t i e s have promised, would be c&nducted on p a s t l i n e s except t h a t I should g i v e the Committee more i n f o r m a t i o n about t h e supply/demand e s t i m a t e s than they have had on p r e v i o u s o c c a s i o n s . My guess i s t h a t t h e Committee w i l l r e a c h a deadlock a t t h e n e x t r e v i e w , and t h i s w i l l s t r e n g t h e n the need f o r legislation. 5. The choice b e f o r e us i s t o l e g i s l a t e now w i t h s t r o n g p r e s s u r e t o i n s e r t a r b i t r a t i o n , which I am very r e l u c t a n t t o do, or t o postpone l e g i s l a t i o n u n t i l t h e Burnham Committee can see what t h e n a t i o n a l p o l i c y looks l i k e . I t h i n k we should adopt the l a t t e r c o u r s e . *They ? / i l l a l s o p r e s s f o r a r b i t r a t i o n between t h e Committee and t h e M i n i s t e r , b u t b o t h s i d e s know I would not contemplate t h i s and t h e l o c a l a u t h o r i t i e s would s u p p o r t me i n r e s i s t i n g i t .
1 .
6, If my colleagues agree, I shall put it to both sides that 1* am not abandoning tho idea of legislation but postponing it to give them the chance to see that the teachers are net being singled out in advance of the formulation of a long-term incomes policy. I shall make it plain that /the price of postponement is that in the event of deadlock they can rely on nobody but themselves to resolve it; and that if they submit agreed proposals which I judge to be contrary to the national interest I shall have'no compunction in rejecting them, even though it means, as they complained last time, that they have laboured in vain or that the teachers can have no increase at all until they submit agreed scales that I find acceptable, 7, In order to improve the working of the existing machinery I shall, at the outset of negotiations, give them any information about the needs of the schools that is relevant in a salaries context. I shall also let them know that if I' have occasion to reject their recommended scales I shall give my reasons and, if I think fit, set a limit beyond which the Government will not go. I had originally intended to prevent unrealistic discussions by naming a global sum .as a maximum while they were still in the course of negotiation, but both sides are opposed to this on the ground, that it would leave little or no room for genuine negotiation, 8. To sum up, at the present stage of the development of our incomes policy, and bearing in mind the emphasis we have put on the value of arbitration, legislation to revise Burnham machinery introduced now might weaken our chances of resisting salary increases for teachers that were out of line with our incomes policy,,
D.E.
Ministry of Education, w.l.
,5th February, 1962
C O P Y NO..
C. (62) 35
N
22nd F e b r u a r y , 15.62 CABINET
P R O P O S E D BUILDING IN BROAD S A N C T U A R Y M e m o r a n d u m b y t h e M i n i s t e r of W o r k s
I believe that the Cabinet might like to know the stage r e a c h e d on the p r e p a r a t i o n of p l a n s for d e v e l o p i n g the s i t e in B r o a d S a n c t u a r y opposite W e s t m i n s t e r Abbey. 2. The L a b o u r G o v e r n m e n t p l a n n e d t o e r e c t a n e w C o l o n i a l ' Office on the w h o l e of t h i s s i t e . In N o v e m b e r , 1958, t h e H o m e A f f a i r s C o m m i t t e e d e c i d e d t h a t the f r o n t of the s i t e s h o u l d r e m a i n open and t h a t a b u i l d i n g of m o d e s t s i z e s h o u l d b e e r e c t e d b e h i n d t h e l i n e of M a t t h e w Parker Street. T h i s w a s a n n o u n c e d by m y p r e d e c e s s o r and w a s w e l l received. 3. I p r o m o t e d an open a r c h i t e c t u r a l c o m p e t i t i o n for a b u i l d i n g on this site. The a s s e s s o r s v/ere Sir William Holford, Sir L e s l i e M a r t i n and m y Chief A r c h i t e c t . The r e s u l t w a s a n n o u n c e d j u s t b e f o r e C h r i s t m a s and the winning d e s i g n by M r . W i l l i a m Whitfield i s fully i n a c c o r d a n c e with t h e d e c i s i o n of t h e H o m e A f f a i r s C o m m i t t e e , 4. The c o m p e t i t i o n e n t r i e s , i n c l u d i n g t h e w i n n i n g d e s i g n , w e r e on p u b l i c e x h i b i t i o n for a w e e k a t t h e e n d of l a s t y e a r . T h e winning d e s i g n w a s widely i l l u s t r a t e d i n t h e d a i l y and a r c h i t e c t u r a l p r e s s , a.nd h a s h a d a f a v o u r a b l e r e c e p t i o n n o t only i n p a p e r s l i k e T h e T i m e s but in m o s t of t h e a r c h i t e c t u r a l p r e s s a l s o . The d e s i g n i s , I u n d e r s t a n d , a c c e p t a b l e t o t h e London County C o u n c i l a s P l a n n i n g A u t h o r i t y . I am now about to s u b m i t it in t h e n o r m a l way for t h e o b s e r v a t i o n s of the Royal Fine Art C o m m i s s i o n . 5. S u b j e c t to t h e v i e w s of t h e R o y a l F i n e A r t C o m m i s s i o n b e i n g f a v o u r a b l e , I p r o p o s e to p r o c e e d w i t h t h e p r e p a r a t i o n of d r a w i n g s w i t h a v i e w to i n v i t i n g t e n d e r s .
j . A-. H.
M i n i s t r y of W o r k s , S . E . 1. 22nd F e b r u a r y , 1962.
HIS DOCUMENT 15 T H E P R O P E R T Y O F H E R BRITANNIC M A J E S T Y ' S G O V E R N M E N T
£^162).36.
COPYNO.
S O
23gd F e b r u a r y , , 1^62
CABINET
POST OFFICE GIRO,SYSTEM M e m o r a n d u m by t h e P o s t m a s t e r - G e n e r a l
On 14th N o v e m b e r , 1961, t h e C a b i n e t c o n s i d e r e d t h e p u b l i c a t i o n of a "White P a p e r on a P o s t Office g i r o s y s t e m : i n v i t e d t h e C h a n c e l l o r of t h e E x c h e q u e r to o b t a i n the v i e w s of t h e Bank of E n g l a n d , a n d a g r e e d t o r e s u m e d i s c u s s i o n l a t e r ( C . C. (61) 62nd C o n c l u s i o n s , M i n u t e 4 ) . 2. A l e t t e r f r o m t h e Deputy G o v e r n o r of t h e B a n k i s a n n e x e d . He a d v i s e s : a g a i n s t s e t t i n g up a P o s t Office g i r o a t t h i s s t a g e : s u g g e s t s t h a t t h e B a n k s s h o u l d b e p r e s s e d to b r o a d e n t h e i r s e r v i c e f o r c r e d i t t r a n s f e r s , b u t a d d s t h a t if, i n t i m e , t h e B a n k s d e m o n s t r a b l y fail t o m e e t t h e n e e d s of t h e p u b l i c t h e P o s t Office should c o n s i d e r filling t h e g a p . 3.
T h e r e a r e now two a l t e r n a t i v e s : (a) t o p u b l i s h the P o s t Office r e p o r t a n d t e s t p u b l i c r e a c t i o n , it b e i n g m a d e c l e a r ( a s it i s in t h e P r e f a c e t o the d r a f t White P a p e r ( C . (61) 176)) t h a t t h e G o v e r n m e n t a r e not c o m m i t t e d t o a giro: or (b) t o s a y t h a t , in v i e w of t h e f a c i l i t i e s n o w b e i n g d e v e l o p e d by t h e B a n k s , t h e G o v e r n m e n t h a v e d e c i d e d to take no a c t i o n f o r t h e p r e s e n t , b u t w i l l r e v i e w t h e p o s i t i o n if a t a l a t e r d a t e it i s c l e a r t h a t the n e e d s of t h e p u b l i c a r e n o t b e i n g adequately m e t .
4. My own v i e w i s t h a t t h e r e i s m u c h to be s a i d f o r p u b l i s h i n g t h e White P a p e r . It d o e s n o t c o m m i t u s t o a n y t h i n g . It would p r o b a b l y act as a spur to the Banks. T h e r e i s a good d e a l of i n t e r e s t i n t h e H o u s e on t h e s u b j e c t a n d t h e f a c t t h a t a d e p a r t m e n t a l s t u d y h a s b e e n m a d e is well known. E v e n t h o u g h t h e s t u d y i s only a n official d o c u m e n t , I m i g h t find i t difficult t o r e s i s t a d e m a n d f o r p u b l i c a t i o n . On t h e o t h e r h a n d , we m u s t e x p e c t t h a t t h e B a n k s w o u l d p u b l i c l y c r i t i c i s e the r e p o r t . No doubt the O p p o s i t i o n would f a s t e n on t h e White P a p e r a s a n o p p o r t u n i t y t o p r e s s f o r G o v e r n m e n t e n t e r p s i a e i n this field.
-1
5. I s h o u l d v a l u e t h e v i e w s ox t h e C a b i n e t . I shall have.to say what the G o v e r n m e n t view is in m i d - M a r c h , when the House debates Posv: Office p r o s p e c t s for n e x t y e a r .
J.R.B.
G e n e r a l P o s t Office
t
E . C . 1.
22nd F e b r u a r y , 1962.
ANNEX
BANK O F E N G L A N D 2 3 r d J a n u a r y , 1962.
Dear Sir Thomas P a d m o r e , Giro We h a v e now h e a r d f u r t h e r f r o m t h e C l e a r i n g B a n k s a n d I a c c o r d i n g l y wx*ite t o t e l l y o u h o w t h e i r t h i n k i n g i s d e v e l o p i n g a n d t o give yoix t h e B a n k ' s v i e w s , f o r w h i c h you a s k e d i n y o u r l e t t e r of 20th N o v e m b e r . So f a r a s t h e C l e a r i n g B a n k s a r e c o n c e r n e d , t h e p o s i t i o n i s t h a t t h e y a r e p l e a s e d w i t h the d e v e l o p m e n t to d a t e of t h e c r e d i t transfer system. T h e y a l s o h a v e e v e r y i n t e n t i o n of a d a p t i n g a n d i m p r o v i n g it f u r t h e r ; b u t t h e y h a v e n o t y e t r e a c h e d a c o n c l u s i o n on w h e t h e r t h e r e i s j u s t i f i c a t i o n f o r e x p a n d i n g i t i n t o a full g i r o on continental lines. T h e y p o i n t out t h a t , l a r g e l y b e c a u s e t h e w i d e l y d e v e l o p e d c h e q u e s y s t e m in t h i s c o u n t r y i s not p a r a l l e l e d e l s e w h e r e , t h e e x p e r i e n c e of c o n t i n e n t a l c o u n t r i e s in t h e d e v e l o p m e n t of g i r o s y s t e m s i s n e t a s o u n d g u i d e t o t h e l i k e l y a u c e e s s of a full g i r o in this country. An e x h a u s t i v e e x a m i n a t i o n of the p r o s p e c t s h e r e w a s p u t in h a n d s o m e m o n t h s a g o b u t i t i s not y e t c o m p l e t e d and t h e B a n k s ' p r e s e n t v i e w i s t h a t t h e c h e q u e s y s t e m and t h e c r e d i t t r a n s f e r s y s t e m fully m e e t p u b l i c d e m a n d a s it e x i s t s a t p r e s e n t . T h e u s e of t h e c r e d i t t r a n s f e r s y s t e m i s l i k e l y to b e c o n s i d e r a b l y e x t e n d e d a s t h e f a c i l i t i e s a v a i l a b l e b e c o m e m o r e w i d e l y k n o w n and i t i s only in t h e l i g h t of t h i s d e v e l o p m e n t t h a t a j u d g m e n t c a n be m a d e of the d e m a n d in t h i s c o u n t r y f o r t h e s e t t l e m e n t of d e b t s b y this method. In t h e B a n k s ' e x p e r i e n c e t o d a t e t h e p u b l i c d o e s n o t -2
w a n t g r e a t e r s p e e d in t h e t r a n s m i s s i o n of p a y m e n t s t h a n the B a n k s afford and it d o e s not find t h e i r c h a r g e s e x c e s s i v e . What it d o e s n e e d i s a c o m p r e h e n s i v e s e r v i c e w h i c h g i v e s c u s t o m e r s , on one account, t r a n s f e r facilities, a cheque s e r v i c e and an o v e r - d r a f t s e r v i c e - a n d t h i s the B a n k s c a n , but t h e P o s t Office c a n n o t , p r o v i d e . One s u b s i d i a r y p o i n t h a s b e e n d e c i d e d . The B a n k s h a v e c o n s i d e r e d w h e t h e r , if t h e y w e r e t o e s t a b l i s h a full g i r o s y s t e m , t h e y could m a k e it a v a i l a b l e t o t h e p u b l i c on a s i x ^ d a y w e e k b a s i s w i t h h o u r s of opening c o m p a r a b l e to t h o s e of t h e P o s t Office. '. They have concluded that they could not. To do so would be u n e c o n o m i c and would i m p o s e a b u r d e n of c o s t s w h i c h no b a n k would w i s h to sustain;; e v e n m o r e i m p o r t a n t p e r h a p s , t h e i r p r e s e n t 5jr-day w e e k a l r e a d y p r e j u d i c e s r e c r u i t m e n t and s u c h a n e x t e n s i o n of h o u r s (which t h e y c o n s i d e r would h a v e t o a p p l y to a full r a n g e of b a n k i n g s e r v i c e s ) would m a k e t h i s r e c r u i t i n g p r o b l e m i n f i n i t e l y m o r e difficult. They do, h o w e v e r , p r o p o s e to i n v e s t i g a t e t h e whole q u e s t i o n of b a n k i n g h o u r s q u i t e a p a r t f r o m the c o n t e x t of a g i r o , t o s e e w h e t h e r t h e p u b l i c m i g h t be o f f e r e d a c h a n g e i n , o r a d d i t i o n a l , o p e n i n g h o u r s without c r e a t i n g an i m p o s s i b l e staff p o s i t i o n for the B a n k s . T h u s t h e B a n k s a r e a s y e t u n d e c i d e d on w h e t h e r t h e r e i s j u s t i f i c a t i o n for t h e i r d e v e l o p i n g t h e c r e d i t t r a n s f e r s y s t e m i n t o a full g i r o ; if t h e y did sd t h e y c o u l d n o t h o p e to m a t c h P o s t Office h o u r s , but s o m e i m p r o v e m e n t in t h e i r h o u r s of o p e n i n g g e n e r a l l y m a y p r o v e possible. It r e m a i n s t h e c a s e , h o w e v e r , t h a t if t h e P o s t Office w e r e t o d e c i d e t o s e t up a g i r o t h e B a n k s would t h e n , a s s t a t e d in S i r O l i v e r F r a n k s ' l e t t e r of 29th J u n e to t h e P o s t m a s t e r - G e n e r a l , f e e l f r e e t o go a h e a d with a g i r o of t h e i r own d e s p i t e any d o u b t s a s to i t s j u s t i f i c a t i o n and the v o l u m e of p o t e n t i a l d e m a n d . T h i s is b e c a u s e t h e y f e a r t h a t t h e effect on t h e B a n k s of a P o s t Office g i r o would be a s u b s t a n t i a l d i m i n u t i o n of d e p o s i t s w h i c h would s e r i o u s l y r e d u c e t h e B a n k s ' a b i l i t y to fulfil t h e i r p r o p e r f u n c t i o n s in the f i n a n c i n g of i n d u s t r y and t r a d e . T h e B a n k s m e n t i o n i n c i d e n t a l l y t h a t t h e y would w i s h t h e c o n t e n t s of S i r O l i v e r F r a n k s ' l e t t e r t o be m a d e p u b l i c at t h e t i m e of a n y a n n o u n c e m e n t by t h e P o s t Office r e g a r d i n g t h e i r p r o p o s e d giro. T h e v i e w s of the B a n k r e m a i n b r o a d l y a s s e t out in the t h e n G o v e r n o r ' s l e t t e r of 2 6 t h O c t o b e r , I960, to S i r F r a n k L e e . The. c r e d i t t r a n s f e r s y s t e m a s it e x i s t s at p r e s e n t c a n n o t be s a i d to p r o v i d e a s e r v i c e c o m p a r a b l e in s p e e d , e c o n o m y of c o s t and r e a d y a v a i l a b i l i t y t o the p u b l i c with t h a t p r o j e c t e d in t h e P o s t Office r e p o r t . However, t h e B a n k s m a k e a f a i r p o i n t in a r g u i n g t h a t , b e f o r e e m b a r k i n g on a r i v a l s c h e m e , we s h o u l d w a i t and s e e w h e t h e r t h e i r p r e s e n t a r r a n g e m e n t s , when t h e y a r e fully r u n i n , w i d e l y k n o w n , a n d p e r h a p s f u r t h e r developed, provide a g e n e r a l l y acceptable, s y s t e m for the t r a n s m i s s i o n of f u n d s . It m a y be s e v e r a l y e a r s b e f o r e t h i s c a n be f a i r l y j u d g e d . T h e m a i n q u e s t i o n in o u r m i n d s i s w h e t h e r t h e B a n k s ' a r r a n g e m e n t s w i l l a d e q u a t e l y m e e t t h e n e e d s of t h o s e without b a n k i n g a c c o u n t s .
-3
At l e a s t it s e e m s c l e a r t h a t t o h a v e t w o g i r o s i n c o m p e t i t i o n with one a n o t h e r w o u l d be t h e w o r s t p o s s i b l e a r r a n g e m e n t . Since I h a v e no doubt t h a t the B a n k s p r o c l a i m e d i n t e n t i o n to s e t up a r i v a l s y s t e m if t h e P o s t Office go a h e a d i s t o b e t a k e n s e r i o u s l y , arid g i v e n a l s o t h e M i n i s t e r i a l d o u b t s t o w h i c h y o u r e f e r r e d in y o u r l e t t e r , o u r a d v i c e would be a g a i n s t t h e s e t t i n g up of a P o s t Office g i r o at t h i s juncture. I n s t e a d I s u g g e s t we s h o u l d a i m t o e x e r t p r e s s u r e on t h e B a n k s to i m p r o v e and b r o a d e n t h e i r s e r v i c e , u s i n g t h e p o s s i b i l i t y of a c t i o n by t h e P o s t Office a s a s p u r if n e c e s s a r y . If M i n i s t e r s accept this c o u r s e , the announcement might b o r r o w substantially f r o m the B a n k s ' a r g u m e n t s for m a k i n g no i m m e d i a t e m o v e but i n d i c a t e t h a t H e r M a j e s t y ' s G o v e r n m e n t s t a n d r e a d y , on the l i n e s r e c o m m e n d e d b y R a d c l i f f e , to m o v e t h e P o s t Office to a c t i o n if t h e n e e d b e c o m e s c l e a r a n d if t h e B a n k s a r e not r e a d y to m e e t t h a t n e e d themselves. 1
Yours sincerely, (Sgd. ) H. C . B . MYNORS
S i r T h o m a s P a d m o r e , K. C. B . , Treasury Chambers.
Printed for the Cabinet.
March
C. (62) 37 28th February,
1962
Copy No.
50
1962
CABINET
OXFORD
ROADS
MEMORANDUM BY THE SECRETARY O F STATE FOR THE H O M E DEPARTMENT
It is now a matter of urgency that a decision should be reached on Oxford roads. T h e Home Affairs Committee on 21st February considered a memorandum by the Ministers of Housing and Local Government and Transport; a copy is annexed. For the convenience of the Cabinet the views of the Committee are summarised in the paragraphs below. 2. What is required is a decision in principle on whether there should be a road through Christ Church Meadow, as proposed by Oxford City Council, or a road on a line further south, as proposed by the Oxford Preservation Trust. It is the firm view of the two Ministers concerned that one road or the other must be built in order to restore as much peace as possible to the University area and to relieve the traffic problem in the area of the High and Carfax. The decision turns on whether the damage which would be done to amenity by a road across the Meadow would outweigh the greater traffic efficiency which that road would secure. As indicated in paragraph 16 of the Annex, the cost considerations cannot in themselves be regarded as decisive. 3. The two Ministers would prefer the road across the Meadow to the longer route and most members of the Committee were disposed to accept this view. But the Minister of Pensions and National Insurance and the Minister of Works were not satisfied that any new road was required. They suggested that completion of the system of outer by-passes might have a greater effect than was being allowed for in relieving congestion in the centre and thought that their effect could be supplemented if necessary by imposing restrictions on the use of Magdalen Bridge. The value of preserving the peace of the Meadow should in their view be put very high indeed and if one road or the other had to be built the longer route should be chosen: it would not damage amenity and would be free of possible difficulties over flooding. 4. The rest of the Committee felt no serious doubt about the need for a new road. The effect of the by-passes cannot be great because the main traffic trouble does not arise from people wishing to get from one side of the city to another but from people wishing to get to the centre. Restrictions of greater or less severity might be needed if either of the proposed roads were built. Those required to ensure effective use of the longer route would affect both ends of the High and their severity would make them most unpalatable to the city. On amenity, it was pointed out that the line of the Meadow road as now proposed would be over a quarter of a mile from Christ Church and would not be open to the same objections as the line suggested several years ago. T h e road could be built in a cutting and, although this would be expensive, the increased cost would still fall short of the cost of the longer route. One member of the Committee said that the Meadow in its present condition was unsightly and that its appearance might well be improved by the landscaping which a road would entail and by the higher standard of maintenance on adjoining land which would then be called for. Effective landscaping would also help to reduce noise. 60491
5. The Committee took note of a further point, which was made on behalf of the Lord President of the Council. It is evident that a road across the Meadow would be regarded in the House of Lords as desecration and that there would be the utmost difficulty in securing Lords approval for an Order, if an Order proved to be necessary, authorising; the construction of such a road. 6. I have no alternative but to summarise the conclusion that a substantial ^majority favoured the Meadow road. f
* "
.
Home Office, S.W. 1,
28th February, 1962.
R. A. B.
ANNEX
OXFORD
ROADS
MEMORANDUM BY THE MINISTER OF H O U S I N G AND LOCAL GOVERNMENT AND
MINISTER FOR W E L S H AFFAIRS AND THE MINISTER OF TRANSPORT
The Oxford roads question has now, after many vicissitudes, reached the point of decision. The Government have accepted responsibility for making the decision and decide now we must. Until this is settled the City Council will find it increasingly difficult to deal with many of the planning applications which come to them, and in particular they cannot themselves get on with the much overdue redevelopment of St. Ebbe's. 2. At the request of the Council my predecessor held an enquiry at large in December 1960, at which anybody was free to offer any solution of the Oxford traffic problem. The enquiry was taken by Sir Frederick Armer and his report has been published. It was debated in the House of Lords on 26th June, 1961. 3. T h e report has been examined by our two Departments in the light of all the information produced at the enquiry and also of the views expressed in the debate in the House of Lords. The Issue 4. It is common ground that two things are needed. One is to restore as much peace as possible to the University area by relieving it of traffic. A complete " precinct" is not practicable; but if the traffic using the High could be greatly reduced the gain to the University would be enormous. The other is to solve so far as possible the Oxford traffic problem; some alternative to the hopelessly congested road system revolving round Carfax would be needed even if this were not a University city. 5. Both purposes entail the construction of a road to relieve Magdalen Bridge, the High, Carfax and the Cornmarket; together with the provision of adequate car parks as close to the centre as possible. Relief will not be achieved merely by the outer by-passes, already almost complete. The City Council have carried out a traffic survey, which has been analysed by the Road Research Laboratory (report published in 1959). The analysis shows that completion of the outer by-passes cannot be expected to relieve the central area by more than 15 per cent.
6. Two dozen schemes of one kind or another were ventilated at the public enquiry. We are clear, basing ourselves on the results of the traffic survey, that only two of these are worth considering: , (i) One is a road crossing the middle of Christ Church Meadow, bridged over the Cherwell just south-west of St. Hilda's and under-passing St. Aldate's into St. Ebbe's. This was proposed at the enquiry by the Council and is the scheme recommended by the Inspector. (ii) The other is a road south of the Meadow, crossing the Isis just below its junction with the Cherwell, coming to a roundabout junction with the Abingdon road and so up that road (widened) into St. Ebbe's by a second bridge just west of Folly Bridge. A road south of the Meadow was proposed at the enquiry by the Oxford Preservation Trust and was supported in its essentials by the University and most of the Colleges which expressed an interest. 7. A large scale map showing both lines is available; and a copy can be provided for any Minister who wants one. 8. West of St. Aldate's through St. Ebbe's and away north the two routes merge and provide for car parks convenient to the Cornmarket. We do not think that this part is open to serious argument at this stage. The precise line of the whole route will be the subject of a further enquiry at which detailed objections will be heard. The issue of principle which we have to put to our colleagues is the choice for the first part of the route between (i) a direct road across the Meadow (ii) a longer road to the south of it. The Arguments 9. There is no doubt at all that the direct road would be the better solution judged solely on traffic considerations. Being shorter and more direct it would be much more attractive to traffic. In order to make the southern line at all comparable it would be necessary to compel traffic to use it, by closing the Headington and Cowley roads and / or Magdalen Bridge, to everything except buses and bicycles. 10. The evidence from the Road Research Laboratory, which was not shaken at the enquiry, was that the direct route across the Meadow would effect a major relief to the central area without any road closure. Their estimate was that with this road the flow in the University area would in 15 years' time, even with the increase in total traffic expected, still be at the level of the 1930s. Of course it would still be possible to close Magdalen Bridge to most traffic under this scheme, and so increase its effectiveness. Indeed it would be easier to do so under this scheme since the alternative would be shorter. 11. The longer route could be expected to bring relatively little relief to the University area unless the approach roads a n d / o r the Bridge were closed. 12. The City Council have always opposed the closing of the Bridge, and would almost certainly oppose the closing of the approach roads, which would cut off a substantial section of the community in St. Clements. So that if we decided for the longer route south of the Meadow we might have difficulty in making it effective. 13. The longer route would also entail more demolition of sound property in St. Clements. 14. The objection to the direct route is, of course, the effect on the Meadow. It was this more than anything else which led Members of the House of Lords to attack the Armer report in the June debate. If we decided to approve this route the House of Lords would almost certainly register violent disapproval. 15. The question we have to decide is whether the damage to the Meadow of a road crossing it would be so serious that we must go for the longer and less efficient alternative. The line proposed would be over a quarter of a mile distant from the Colleges backing on to the Meadow, and they should not be seriously affected. The paths, including the Long Walk, would be kept with nearly all the trees and the road itself could be screened by trees and bushes. It might indeed be sunk so that the traffic would not be visible except where the road had to rise to cross the Cherwell. That would reduce the noise as well as the effect on the whole
appearance of the Meadow. It would greatly add to the cost since this is flood plain; but even so the road Would cost less than the longer route and we would be prepared to defend the additional cost entailed in sinking the road if, on more detailed examination, it seemed a feasible and worthwhile plan. But however the road is designed it must cut the Meadow in half and change its character. 16, As between t h e two schemes cost should not, we think, be regarded as a decisive factor. The whole of the direct route, including the part across St. Ebbe's and away north, would cost about £2£ million if the road crossed the Meadow at ground level; about £3£ million if it were sunk as we must be prepared to contemplate if we go for this route. The. longer route would cost about £4 million. 17. The City Council will be bitterly disappointed if we cannot bring ourselves to face a road across the Meadow. After long heart-searching they did so, accepting what seemed to them the conclusive evidence from the traffic survey. They put their view to the test of the enquiry and of any alternative anybody could propose; and the Inspector concluded that they were right. It is they who have to carry through whatever scheme we decide is the right one; and although they can be expected to accept whatever decision we reach, they will have little heart for the longer route. Conclusion 18. The question is whether we decide for the more efficient traffic route crossing the M e a d o w ; or whether we think that the damage to the Meadow of any road crossing it, however carefully designed and screened (or if appropriate sunk) is more than we can face. This is anybody's view. On traffic grounds alone the Minister of Transport has no doubt that the Meadow road is the right answer. Together we would be prepared to announce and defend a road across the Meadow if our colleagues will face it; but if not we will defend the longer route. All we ask is that we should now decide firmly for one or the other in principle; the detailed line, including the question of sinking the road if we decide for the Meadow route, to be settled after further examination with the City Council and the final enquiry which has to be held. C. H. E. M. 6th February,
1962.
Printed for the Cabinet.
C (62) 38 26 th February,
February
1962
Copy No. 5 0 1962
CABINET
UNIVERSITY EXPANSION A N D UNIVERSITY
SALARIES
MEMORANDUM BY THE SECRETARY OF STATE FOR THE H O M E DEPARTMENT
During their discussion of university salaries the Cabinet were informed that the University Grants Committee h a d submitted to the Treasury a programme for university expansion involving a 56 per cent, increase in university staffs over the five years 1962-67 (C.C. (62) 5th Conclusions, Minute 7). It was suggested that if approval could not be given for substantial increases in the salaries of university teachers the expansion programme could not be carried out and would have to be revised, possibly with lasting damage to the relations between the Government and the universities. Subsequently, by arrangement with the Chief Secretary, Treasury, the Committee on Education Policy examined the expansion plan and, in the light of their conclusions on that matter, they also considered the salaries problem further. University Expansion, 1962-67 2. The proposals put forward by the University Grants Committee would involve an increase in total public expenditure on the universities, including capital expenditure and student awards, from £104 million in 1961-62 to about £165 million in 1966-67. This increase of some 60 per cent, in expenditure would cater for a 36 per cent, increase in student numbers, from about 110,000 this year to 150,000 five years hence. The Committee on Education Policy considered that it would be inadvisable to seek to reduce the number of student places below the 150,000 proposed for 1966-67. Savings could, however, be obtained by avoiding during the quinquennium expenditure proposed by the University Grants Committee for the purpose of making good the slight deterioration in the ratio of students to staff which had occurred in the past few years, and by aiming at 170,000 places by 1973 rather than 1970-71, which would affect the rate of new building during the later years of the forthcoming quinquennium. The effect of these suggested savings would be to reduce the total public expenditure on the universities in 1966-67 to around £155 million. It is, however, only the recurrent grant element within this figure which has to be settled and announced shortly, and the amount of recurrent grant for 1966-67 corresponding to a programme of this kind would be about £75 million, the exact figure depending on the amount of non-staff costs per student, which I understand the Chief Secretary is pursuing further with the University Grants Committee. The Chief Secretary would work out and announce, within the framework of a Cabinet decision on the above lines, amounts of recurrent grant for each of the five academic years 1962-63 to 1966-67. 3. The Chief Secretary reported the Committee's provisional views to the University Grants Committee, who expressed regret if ' there could be no improvement in the student / staff ratio during the next five years, but believed that the universities would understand and accept the reasons; the University Grants Committee added that, in their view, the expansion of the universities on this scale was practicable provided that the salaries of university teachers were made sufficiently attractive to secure the necessary increase in staff. 60464
University Salaries/ 4. The Cabinet will recall that the University Grants Committee last July reported to the Chancellor of the Exchequer that an increase in salaries averaging 17 per cent, was essential to enable sufficient staff to-.be recruited for the proposed expansion. T h e Chief Secretary, Treasury, informed the Cabinet in January that he felt unable to accept this but that, in his view, if the staff were to be recruited, it might be reasonable to approve an increase of 8-9 per cent, from 1st August, 1962, distributed so as to increase the attractiveness of the two lowest grades- while providing some increase for the higher posts. Before coming t o . a conclusion.on this matter, the Cabinet felt that they should have details of the opening salaries which graduates could command at present in the fields open to them in industry, the civil service and the teaching profession outside the universities. Information on these points is set out in the Annex to this paper. 5. When the Committee on Education Policy considered salaries on 16th February, they had before them the information given in the Annex. They fully accepted that there was a case for a substantial increase to bring university salaries into line with salaries in the rest of the teaching-profession. They, allowed full weight to the consideration that university salaries were in some respects special—university teachers had no right to go to arbitration; there was some element of pre-pause commitment to them; and there was a special expansion problem. But the feeling of most members of the Committee was that, whatever the force of these points, to announce an increase of 8-9 per cent, at the present stage would seriously damage the Governmenfs incomes policy. Only: few days before, the railwaymen had been told that the Government accepted that a case had been made for a larger increase in their wages than 3 per cent, but that this was not possible in the country's economic situation this year. On the other hand, the Lord President of the Council argued that it would be ridiculous to give a large increase in pay to all other classes of teachers but not to those in the universities and that it was inappropriate to apply the incomes policy blindly to the special problem of university teachers, considering the paramount importance of the university expansion. H e thought that if the Government gave a firm lead it would be generally accepted that the position of university teachers was quite/ different from that of wage earners. a
6. The majority view of the Committee was that, in view of the overriding importance of securing restraint in incomes this year, it would be right to announce that only 3 per cent, could be given to university teachers, effective from 1st;April, while making it clear that salaries would be further considered in the light ot alt circumstances at this time next year. I undertook, however, that in reporting this; view to the Cabinet I would state that the Lord President of the Council would prefer that there should be a substantial increase in university salaries.this.year. 7. The Chief Secretary, Treasury, has since, I understand, seen the Chairman of the University Grants Committee and communicated the present position to him in confidence (the next meeting of the Committee is not until 15th March). The Chairman cannot be sure whether, if. the Government decide on 3 per cent., the Committee will wish to use it entirely for the recruitment grades. (Lecturers and Assistant Lecturers), giving nothing to the higher grades. He has no doubt, however, that the Committee will need to pursue further with the Vice-Chancellors the possible effects of any salary decision on the expansion programme, and before that is done he thinks (and the. Chief Secretary, Treasury, agrees) that an announcement of the. Governmenfs decision should he made. R. A. B.'
Home Office, S.W. 1,
26th February, 1962,
ANNEX
COMPARISON OF OPENING SALARIES OF GRADUATES GOOD HONOURS DEGREES
WITH
Starting age* Profession
Date of current salary scale
Teaching— 1. Grammar School 2. Teacher Training College (after 3-4 years \ in teaching) 3. College of Advanced Technology 4. University
Civil 5. 6. 7.
Service— Administrative Class Scientific Class Legal Class
24-27
£
£
860 1962
J
1960
j-
1961
Industry— 8. Medium of samples used for Pay Research
Unit purposes (adjusted for period
elapsed since samples obtained)
21-23
1,170 1,090 850
738 738 1,150
—
775
* The two columns under the heading of " starting age " reflect the fact that in certain professions it is customary for graduates to have postgraduate qualifications or additional professional training before entry.
26 th February,
1962.
IS D O C U M E N T IS T H E P R O P E R T Y O F H E R B R I T A N N I C M A J E S T Y ' S G O V E R N M E N T )
f..
f" C. ( 6 2 ) 39
COPY NO.
s b
2 3 r d F e b r u a r y , 1962 CABINET
gUBMC^SXPENDITURE N o t e b y t h e C h a n c e l l o r of t h e E x c h e q u e r
-
On 22nd F e b r u a r y I m e n t i o n e d the s t a t e m e n t w h i c h I p r o p o s e d to m a k e in t h e H o u s e of C o m m o n s on T u e s d a y , 27th F e b r u a r y , on t h e p u b l i c a t i o n of t h e Vote on A c c o u n t ( C . C. (62) 15th C o n c l u s i o n s , M i n u t e 3). I a n n e x a d r a f t of m y s t a t e m e n t for a n y c o m m e n t s m y c o l l e a g u e s m a y w i s h to m a k e .
Treasury Chambers, 2 3 r d F e b r u a r y , 1962.
S.W.I.
ANN]
s t a t e m e n t on v o t e o n a c c o u n t to b e m a d e . q^"Yyth"februaryv 1 9 6 2 " " " D r a f t b y the C h a n c e l l o r of t h e E x c h e q u e r
I s a i d in m y Budget s p e e c h l a s t y e a r t h a t I w o u l d p u t in h a n d a study of t h e whole p r o b l e m of p u b l i c e x p e n d i t u r e in r e l a t i o n t o t h e p r o s p e c t i v e g r o w t h of o u r r e s o u r c e s for a p e r i o d of five y e a r s a h e a d . T h e R e p o r t of t h e P l o w d e n C o m m i t t e e p u b l i s h e d l a s t J u l y e n d o r s e d t h i s a p p r o a c h , and t h e G o v e r n m e n t h a v e a c c e p t e d - a l l t h e r e c o m m e n d a t i o n s of that R e p o r t . My r t . hon. F r i e n d , the Chief . S e c r e t a r y , h a s b e e n a p p o i n t e d t o h e l p m e in i m p l e m e n t i n g t h e m . As, h o w e v e r , the Plowden C o m m i t t e e itself r e c o g n i s e d , the scope for making l a r g e savings quickly is limited. On 25th J u l y l a s t y e a r , I s a i d t o t h e H o u s e t h a t I would do m y u t m o s t to k e e p the i n c r e a s e s in the 1 9 6 2 / 6 3 E s t i m a t e s t o a l e v e l of not m o r e t h a n Zj p e r c e n t in r e a l t e r m s , in o t h e r w o r d s a f t e r t a k i n g into a c c o u n t i n c r e a s e s in r a t e s of p a y a n d p r i c e s . The E s t i m a t e s for 1 9 6 2 / 6 3 t o t a l £ 5 , 611 m i l l i o n . They s h o w , on a c o m p a r a b l e b a s i s , an i n c r e a s e of £ 3 8 4 m i l l i o n o v e r l a s t y e a r ' s Budget e s t i m a t e s . Had i t not b e e n for d r a s t i c p r u n i n g , i n c l u d i n g a wide r a n g e of s a v i n g s i n a d m i n i s t r a t i v e c o s t s , t h i s f i g u r e would have been m u c h higher. In f a c t m o r e t h a n one q u a r t e r of the C i v i l Votes have been brought lower than they w e r e l a s t y e a r . Of t h e i n c r e a s e , £139 m i l l i o n i s due t o i n c r e a s e s in r a t e s of p a y and p r i c e s . T h e b a l a n c e of £ 2 4 5 m i l l i o n i s t h e i n c r e a s e i n r e a l t e r m s . The f i g u r e f o r a 2jr p e r c e n t i n c r e a s e would h a v e b e e n £134 m i l l i o n . T h e r e f o r e t h e E s t i m a t e s e x c e e d m y t a r g e t b y £111 m i l l i o n . S e v e n - e i g h t h s of the i n c r e a s e of £ 3 8 4 m i l l i o n i s a c c o u n t e d for by s i x l a r g e i t e m s . Agricultural support r e q u i r e s £66 m i l l i o n m o r e , the r a i l w a y s deficit £43 m i l l i o n . T h e s e two i t e m s t o g e t h e r a r e £109 m i l l i o n . D e f e n c e , t o g e t h e r w i t h r e l a t e d e l e m e n t s now in C i v i l V o t e s , r e q u i r e s n e a r l y £100 m i l l i o n m o r e . T h e i n c r e a s e s in g e n e r a l a n d r a t e d e f i c i e n c y g r a n t s to l o c a l a u t h o r i t i e s c a l l f o r a n o t h e r £ 8 6 m i l l i o n - m a i n l y to f i n a n c e e d u c a t i o n , i n c l u d i n g t h e h i g h e r p a y for t e a c h e r s . N a t i o n a l H e a l t h S e r v i c e e x p e n d i t u r e i s up b y £ 2 7 m i l l i o n a n d t h a t on r o a d s by a n o t h e r £15 m i l l i o n . T h e s e E s t i m a t e s , b e c a u s e of t h e w a y i n w h i c h we p r e s e n t o u r a c c o u n t s , i n c l u d e b o t h c u r r e n t and c a p i t a l e x p e n d i t u r e . But p u b l i c s e r v i c e i n v e s t m e n t , both by t h e l o c a l a u t h o r i t i e s and the G o v e r n m e n t , i s of p a r t i c u l a r i m p o r t a n c e in c o n n e c t i o n w i t h the E s t i m a t e s , b e c a u s e m u c h of it c a r r i e s w i t h i t f u t u r e c l a i m s for -1
i n c r e a s e d Government c u r r e n t spending. The o b j e c t , t h e r e f o r e , m u s t be to m a i n t a i n a s t e a d i l y e x p a n d i n g p r o g r a m m e of p u b l i c s e r v i c e i n v e s t m e n t w h i l e m a k i n g s u r e it v/ill be w i t h i n o u r m e a n s . As t h e White P a p e r p u b l i s h e d l a s t O c t o b e r s h o w e d , p u b l i c s e r v i c e i n v e s t m e n t in 1 9 6 2 / 6 3 is p l a n n e d t o i n c r e a s e by 6 p e r c e n t over this y e a r . We a r e w o r k i n g t o p l a n s w h i c h a r e b a s e d on h o l d ing t h e a g g r e g a t e r a t e of i n c r e a s e i n 1 9 6 3 / 6 4 a t t h e s a m e p e r c e n t a g e increase. I b e l i e v e t h a t i s of the g r e a t e s t i m p o r t a n c e . T h e t a s k of c o n t a i n i n g p u b l i c e x p e n d i t u r e b o t h on c u r r e n t a n d c a p i t a l a c c o u n t i s m a d e h a r d e r b y the c o n s t a n t p r e s s u r e in t h i s H o u s e a n d e l s e w h e r e for h i g h e r G o v e r n m e n t s p e n d i n g on m a n y d i f f e r e n t o b j e c t i v e s ; e a c h m a y he d e s i r a b l e in i t s e l f , but c o l l e c t i v e l y beyond what can be afforded. T h e m o r e t h a t we c a n a c h i e v e s o u n d g r o w t h in t h e e c o n o m y , the m o r e we c a n a f f o r d to s p e n d . But t h a t s o u n d g r o v / t h m u s t c o m e in p r e s e n t c i r c u m s t a n c e s f r o m growth in our exports. I believe that the m e a s u r e s I have taken in t h e l a s t few m o n t h s , i n c l u d i n g t h e p a y p a u s e , v/ill h e l p t o a c h i e v e t h a t , a n d t h a t , if we c a n by c o m m o n c o n s e n t c a r r y out a s e n s i b l e i n c o m e s p o l i c y , o u r e x p o r t p r o s p e c t s a r e good, / m
2 3 r d . F e b r u a r y ; 1962
-2
C.J.6J140
C O P Y NO.
24th F e b r u a r y , 1962
CABINET
UGANDA - F I N A N C I A L S E T T L E M E N T M e m o r a n d u m by t h e S e c r e t a r y of S t a t e f o r t h e C o l o n i e s
Uganda, i s due to b e c o m e i n d p e n d e n t on 9th O c t o b e r a n d i n t e r n a l s e l f - g o v e r n m e n t t o be i n t r o d u c e d on 1st M a r c h . At t h a t s t a g e r e s p o n s i b i l i t y for t h e o v e r s e a s e r v i c e o f f i c e r s w i l l p a s s f r o m m e t o E x e c u t i v e P u b l i c S e r v i c e C o m m i s s i o n s in U g a n d a . At t h a t t i m e a c o m p e n s a t i o n s c h e m e for t h e s e officers m u s t be i n t r o d u c e d . If a c o m p e n s a t i o n s c h e m e could not be i m p l e m e n t e d , s e l f - g o v e r n m e n t c o u l d not be i n t r o d u c e d . And if t h i s w e r e t h e r e a s o n f o r p o s t p o n e m e n t t h e d e l a y would be c l e a r l y s e e n t o be t h e r e s u l t of d i f f i c u l t i e s o v e r s a f e g u a r d i n g t h e i n t e r e s t s of o v e r s e a officers. 2. Before the Uganda G o v e r n m e n t a r e p r e p a r e d to introduce a s c h e m e on t h e l i n e s t h a t I c o n s i d e r e s s e n t i a l , t h e y w i s h to k n o w w h a t a s s i s t a n c e H e r M a j e s t y ' s G o v e r n m e n t a r e r e a d y to give to h e l p t h e m f i n a n c e t h e i r s h a r e of t h e c o s t , g i v e n U g a n d a ' s p o v e r t y and s e r i o u s d i f f i c u l t i e s on r e c u r r e n t a c c o u n t . T a l k s h a v e t a k e n p l a c e in London in the l a s t few d a y s w i t h a U g a n d a G o v e r n m e n t d e l e g a t i o n on t h i s q u e s t i o n and on c e r t a i n o t h e r r e q u e s t s f r o m U g a n d a for a i d a f t e r i n d e p e n d e n c e , p r i m a r i l y with t h e i r d e v e l o p m e n t p l a n . T h e A n n e x s h o w s w h a t t h e y h a v e r e q u e s t e d and the T r e a s u r y a n d C o l o n i a l Office v i e w s of w h a t n e e d s to be g i v e n . 3. T h e f i g u r e s p r o p o s e d b y t h e T r e a s u r y h a v e b e e n p u t to the U g a n d a d e l e g a t i o n . T h e y w e r e d i s t r e s s e d t h a t t h e offer on c o m p e n s a t i o n fell s h o r t of t h e i r r e q u e s t a n d t h e y c o n s i d e r e d t h e a m o u n t of a d d i t i o n a l d e v e l o p m e n t l o a n a s s i s t a n c e to be q u i t e i n a d e q u a t e , p a r t i c u l a r l y a s t h e g r e a t e r p a r t of o u r a i d w o u l d b e g i v e n d u r i n g t h e p r e s e n t U g a n d a financial y e a r , before independence. They intimated that, although they would h a v e to r e p o r t b a c k t o U g a n d a , t h e y c o u l d not s e e how it would b e p o s s i b l e for t h e U g a n d a G o v e r n m e n t t o a c c e p t a n offer s o m a n i f e s t l y i n f e r i o r , both a b s o l u t e l y a n d r e l a t i v e l y , to the a i d g i v e n t o T a n g a n y i k a last summer. 4. A f t e r t h e M i n i s t e r of S t a t e f o r C o l o n i a l A f f a i r s e x p l a i n e d t h e p o s i t i o n the d e l e g a t i o n p o s t p o n e d t h e i r r e t u r n t o Uganda, t i l l T u e s d a y , 27th F e b r u a r y . I a m c o n v i n c e d t h a t we s h a l l n o t a c h i e v e a s e t t l e m e n t with l e s s t h a n t h e C o l o n i a l Office p r o p o s a l s s h o w n in t h e A n n e x , a n d t h a t t h e c o n s e q u e n c e s of n o t a c h i e v i n g a . s e t t l e m e n t ( o r of h a v i n g a b r e a k d o w n on t h e b a s i s of s u c h a d e m o n s t r a b l y m e a g r e offer) would b e s e r i o u s p o l i t i c a l l y and w o u l d
-1
l e a d t o our h a v i n g u l t i m a t e l y t o offer c o n s i d e r a b l y m o r e a i d t h a n I how r e c o m m e n d . E x p e r i e n c e o v e r T a n g a n y i k a shov/s t h a t it i s a m i s t a k e to p u t f o r w a r d a p r o p o s a l t h a t s t a n d s no c h a n c e of a c c e p t a n c e . I should . h a v e p r e f e r r e d to h a v e p u t t o the U g a n d a d e l e g a t i o n m y o r i g i n a l p r o p o s a l s i n s t e a d of t h e T r e a s u r y offer - and I b e l i e v e t h a t a s e t t l e m e n t would h a v e b e e n a c h i e v e d h a d t h i s b e e n done - and now t h a t the T r e a s u r y offer h a s f a i l e d to s e c u r e a c c e p t a n c e I a m s u r e t h a t we m u s t r e v e r t t o s o m e t h i n g l i k e t h e m a s now s e t out in t h e A n n e x . 5. I s h a l l h a v e to p u t t h e s e p r o p o s a l s to Uganda on T u e s d a y . T h i s i s the l a t e s t t i m e if the c o m p e n s a t i o n s c h s m e i s to be e n d o r s e d by the Uganda l e g i s l a t u r e by t h e end of F e b r u a r y and t h e c o m p e n s a t i o n s c h e m e e n t e r into f o r c e on 1st M a r c h . U n l e s s t h e c o m p e n s a t i o n s c h e m e is a c c e p t e d by t h e n I s h a l l h a v e t o d e f e r t h e i n t r o d u c t i o n of s e l f - g o v e r n m e n t , a n d while f r o m s o m e p o i n t s of v i e w t h i s m i g h t not b e u n a c c e p t a b l e , t h e n e e d to p r o v i d e for s u i t a b l e c o m p e n s a t i o n t e r m s for E u r o p e a n o f f i c e r s would be the w o r s t of r e a s o n s for d e f e r m e n t . 6. I b e l i e v e t h a t m y p r o p o s a l s can be p r e s e n t e d in a way which o f f e r s s o m e c h a n c e of s u c c e s s . A l t h o u g h the Uganda G o v e r n m e n t c l e a r l y a t t a c h p r i m a r y i m p o r t a n c e to the a m o u n t of c o m p e n s a t i o n a i d , we c a n n o t e x p e c t to a c h i e v e a s e t t l e m e n t w i t h o u t m a k i n g a r e a s o n a b l e c o n t r i b u t i o n to t h e i r d e v e l o p m e n t p l a n and m y p r o p o s a l s i n c l u d e what I r e g a r d a s t h e r e a s o n a b l e m i n i m u m . T a k e n a s a w h o l e , the p r o p o s a l s r e p r e s e n t a s a v i n g of n e a r l y £ 4 m i l l i o n o v e r t h e n e x t two y e a ^ s on w h a t we e x p e c t e d t o h a v e to p r o v i d e for Uganda, and i n c l u d e d in t h e aid c e i l i n g f i g u r e s for t h o s e y e a r s . 7. I i n v i t e m y c o l l e a g u e s to a g r e e t h a t I s h o u l d m a k e an offer to t h e Uganda G o v e r n m e n t on t h e l i n e s of t h e C o l o n i a l Office p r o p o s a l s in the A n n e x .
R.M.
C o l o n i a l Office, S. W . l . 2 3 r d F e b r u a r y , 1962
4
-2
ANNEX A
nO !J!lil5-g^-Q.n^T.
AND
Uganda's r e q u e s t £ million A. -FINANCIAL 1^
TREASURY AND COLONIAL O F F I C E PROPOSALS..... Colonial Office Proposal £ Million
T r e a s u r y C-ffer^ ( a l r e a d y p u t to Uganda] £ million
SETTLEMENT
Disagreedjftenisj 1.
Compensation
5 . 5 i.f. 1 .*) 7. 8 over 2.3 i.b.l.*) six y e a r s
2.
Development
15. 59 - 19.09 o v e r five y e a r s
TOTAL i t e m s 1 and 2
23. 39 26. 89
4.25 i.f.l. ) 6.0 1. 75 i . b . l . )
4 . 2 5 i . f . l . ) 5. 3 1.05 i . b . l . ) (a) E x i s t i n g a l l o c a t i o n : 1. 85 g r a n t 2^. 75 loan 4.6" lb) N e w : 1. 5 g r a n t 0. 5 loan 2. 0 Total 6. 6 over 3 y e a r s
a
4.6 ttj
(b)
11. 9 of which 3 . 35 g r a n t and 4 . 25 i . f. 1.
New: 1. 5 g r a n t 2. 4 loan'; 3. 9 Total 8 . 5 t o w a r d s 5 y e a r plan (to b e drawn over 3 y e a r s ) 14. 5 of which 3. 35 g r a n t and 4 . 25 i. f. 1.
Up t o 0. 78 (existing allocation)
Up t o 0. 78 (existing allocation)
Up t o 0. 25
Up t o 0. 25
I I , A g r e e d Items: 1. 2.
Higher Education Defence
0. 5
B. POST-INDEPENDENCE UNITED KINGDOM AID ALREADY C O M M I T T E D
U-aite.d_Kiiig.doni .slia.r.e of c03nap.en.sati.0n..
£-i.,38 m i l l i o n o v e r six y e a r s
(* - i: f. 1. ^f'ixtt&rest-£xee
loan--
m
THIS D O C U M E N T IS T H E P R O P E R T Y O F H E R B R I T A N N I C M A J E S T Y ' S G O V E R N M E N T
Printed for the Cabinet.
C. (62) 41 26th February,
February
1962
Copy N o . 4 0 1962 CABINET
NORTHERN
RHODESIA-CONSTITUTION
MEMORANDUM BY THE P R I M E MINISTER
The Cabinet last discussed this question on 1st February shortly before the Commonwealth Secretary left London for discussions with the Federal Government in Salisbury. T h e Cabinet then agreed to two alternative proposals being put to Sir Roy Welensky, namely: (a) Simply to abolish the numerical alternative and require all candidates to obtain 12-^ per cent, of the votes cast; the Government assumed that, if this course Were adopted, it would be generally agreed that the Asian seat should be abolished, and thought this would be right. (b) T o reduce the qualifying percentage for all candidates to 4 per cent, of the registered voters of each of the two races without any numerical alternative; in this case the Asian seat would be retained (C.C. (62) 10th Conclusions, Minute 7). The Commonwealth Secretary put these alternatives to Sir Roy Welensky. 2. Sir Roy Welensky said that, although he had hoped that Her Majesty's Government would adhere to the June proposals, he would nevertheless and with great reluctance acquiesce in the abolition of the numerical alternative and the equalisation of the qualifying percentage as between the two races at 12£ per cent, of the votes cast. 3. H e subsequently intimated that he would be prepared to accept 8 per cent, of the registered votes which is equivalent to 10 per cent, of the votes cast on an 80 per cent. poll. In each case, however, he insisted that the Asian seat should be retained.
4. Two points therefore must now be decided: (i) Whether the percentage shall be 12£ per cent, or 10 per cent, of the votes cast. (To use the basis of votes cast is more consistent with previous White Papers.) (ii) The abolition or retention of the Asian seat. Arguments for Abolition 5. The Governor of Northern Rhodesia holds the view that abolition of the Asian seat is necessary for African acquiescence in the Constitution and participation in the election. 6. Sir John Moffat, the leader of the Liberals, and the members of his party seem rather uncertain about African reaction but after discussion in Lusaka the Liberal Ministers have expressed the view that there is very grave danger of rejection of the proposed Constitution by the African Nationalist Parties if the Asian seat remains; but that if it were abolished it would be difficult for the United National Independence Party (U.N.I.P.) to boycott the Constitution and that it appeared to them absurd to run such a risk. 7. The Asian community themselves are pressing strongly for the abolition of the seat and the restoration of their right to vote like other citizens in the National seats. Arguments for Retention 8. The arguments for retention a r e : (i) Sir John Moffat and the Liberals are prepared to accept the retention of the Asian seat. One African Nationalist Party, the African National Congress, is likely to co-operate in the new Constitution, whether or not the Asian seat is abolished and to work for further political advance within the Legislature. T h e attitude of the more extreme African Party, U.N.I.P., is uncertain. They may acquiesce in the retention of the Asian seat, but on the other hand it is possible that even if the Asian seat is abolished they may boycott the Elections. (ii) The Asian seat was introduced in June after discussions with the Federal Government. As part of the agreement an additional 500 Africans were added to the U p p e r Roll. If therefore the Asian seat were cancelled, it would be claimed that it was necessary to remove the 500; but this is thought likely to cause great difficulties. (iii) There are respectable precedents within the Commonwealth for special seats for minorities. These arguments are nicely balanced and in order to reach a decision some wider considerations need to be taken into account.
The Future of the Federation 9. We have to face in a few weeks a demand from the African leader in Nyasaland, Dr. Banda, for Nyasaland's secession from the Federation. Unless we can act in agreement with the Federal Government on this issue we shall be in great difficulty, and if Northern Rhodesia has an anti-Federal majority in the Legislative Council, which seems probable whether the Asian seat is abolished or not, the same situation will occur in a year's time in Northern Rhodesia. ' 10. It is clear therefore that we have to face the problem of reconsideration of the Federation on perhaps a very wide basis. If we abandon the Asian seat against our June Understanding with Sir Roy Welensky in addition to abandoning the numerical alternative, to which he has reluctantly agreed, we shall of course have a very severe dispute and accusations of bad faith from the Federal Government. This will make it more difficult to get their co-operation in the problems of Nyasaland and ultimately Northern Rhodesia. 11. On the other hand, it is argued that abolishing the Asian seat in addition to equalising the first hurdle will increase the chance of African co-operation and reduce the security risks. 12. We have to weigh these considerations in reaching a conclusion as to what announcement we must now make regarding the Constitution of Northern Rhodesia. H. M.
Admiralty House, S.W. I,
24th February, 1962.
HIS DOCUMENT IS T H E P R O P E R T Y O F H S R BRITANNIC M A J E S T Y ' S G O V E R N M E N T )
COPY NO.
C, (62) 42 2 7 t h F e b r u a r y , 1962 CABINET
N O R T H E R N RHODESIA - C O N S T I T U T I O N M e m o r a n d u m b y t h e S e c r e t a r y of S t a t e f o r t h e Colonies
W h i l e i t i s , of c o u r s e , a m a t t e r of j u d g m e n t , I do not c o n s i d e r t h a t t h e a b o l i t i o n of the n u m e r i c a l a l t e r n a t i v e a l o n e , . w h e t h e r the h u r d l e be IZj p e r c e n t o r e v e n 10 p e r c e n t , w i l l b e s u f f i c i e n t t o o b t a i n A f r i c a n a c q u i e s c e n c e in t h e C o n s t i t u t i o n . I s h o u l d l i k e t o d e a l with t h e A s i a n s e a t i n t h e following terms: " T h e J u n e p r o p o s a l s a l t e r e d the q u a l i f i c a t i o n s f o r v o t i n g in t h e N a t i o n a l s e a t s by t r a n s f e r r i n g t h e A s i a n v o t e r s to a s p e c i a l s e a t , and at the s a m e t i m e the Upper Roll was e x t e n d e d b y t h e a d d i t i o n of s o m e 500 A f r i c a n v o t e r s . The A s i a n s e a t h a s b e e n t h e s u b j e c t of m u c h c o n t r o v e r s y a n d . i t s a b o l i t i o n h a s b e e n d e m a n d e d by A s i a n s a n d by A f r i c a n s . In t h e s e c i r c u m s t a n c e s I p r o p o s e to r e v e r t t o t h e F e b r u a r y p r o p o s a l s in t h e s e m a t t e r s w h i c h would e n t a i l t h e a b o l i t i o n of t h e A s i a n s e a t a s I b e l i e v e t h a t t h i s would b e m o r e c o n s i s t e n t w i t h the g e n e r a l p r i n c i p l e s of t h e N a t i o n a l s e a t s . 11
R.M.
C o l o n i a l Office, S. W. 1. 26th F e b r u a r y , 1962.
secret' rHIS D O C U M E N T IS T H E P R O P E R T Y O F H E R B R I T A N N I C M A J E S T V S G O V E R N M E N T
Printed for the Cabinet.
C. (62) 43 2nd March,
March 1962
Copy N o .
50
1962 CABINET
SMOKING
AND
HEALTH
MEMORANDUM BY THE SECRETARY OF STATE FOR THE H O M E DEPARTMENT
A report by the Royal College of Physicians on " Smoking and Health " is to be published on 7th March. It gives an authoritative appraisal of the damaging effects of smoking, particularly in connection with lung cancer. At Annex A is a paper which I have discussed with the Health and Education Ministers and the Minister of Housing and Local Government. 2. The Governmenfs policy hitherto has been limited to making the risks of smoking known and leaving the individual to make up his own mind in the knowledge thereof; and all publicity on smoking and lung cancer has been left to the local authorities, who have received no financial or other assistance from the Government. I agree with the Ministers with whom I have discussed the matter that the Government will now have to move forward from this position and that they should be authorised to announce immediately after the publication of the Report a new Government initiative on health education. At Annex B are drafts of answers which might be given to questions in the House on 12th March. The new features are that the Government v/ill be giving advice or guidance to local authorities that smoking should be discouraged, and supplying publicity material for their use. 3. These answers, confined as they are to Government support for action by local authorities in the health education field, may suffice to meet immediate demands for Government action. Meanwhile the Government will have time to consider whether a more elaborate publicity campaign on a national basis should be prepared and what attitude the Government are to take to the other suggestions made in the Report, some of which are highly controversial. 4. These suggestions are quoted in paragraph 4 of Annex A. It is likely that some at least of them will be strongly pressed and the chances of any publicity campaign succeeding would be much diminished if the Government refrained from taking now such measures as are open to them. R. A. B. Home Office, S.W.1, 2nd March, 1962.
60502
A
ANNEX A
SMOKING AND
HEALTH
MEMORANDUM BY THE SECRETARY OF STATE FOR SCOTLAND, THE MINISTER OF
EDUCATION AND THE M I N I S T E R OF H E A L T H
The Royal College of Physicians have prepared a Report, to be published on 7th March but already " leaked " in the Daily Express, on " Smoking and Health ". It is an authoritative collection and appraisal of existing data rather than a new contribution to knowledge. Its main conclusions are set out in Appendix A. 2. There can be no doubt about the serious effect on health of the great and growing consumption in this country of tobacco, particularly cigarettes. About 60 people die of lung cancer every day and most of these deaths would have been avoided if the patient had not smoked. Indeed lung cancer is a largely preventible disease. 3. T h e question for us is whether it is our duty as a Government to set about preventing it. W e shall certainly be pressed to announce our attitude as soon as the Report is published. 4. T h e Report suggests that " general discouragement of smoking, particularly by young people, is necessary ", and it makes the following specific suggestions as to the action which the Government should take to this end: (i) more education of the public and especially school-children concerning the hazards of smoking; (ii) more effective restrictions on the sale of tobacco to children; (iii) restriction of tobacco advertising; (iv) wider restriction of smoking in public places; (v) an increase of tax on cigarettes, perhaps with adjustment of the tax on pipe and cigar tobaccos; (vi) informing purchasers of the tar and nicotine content of the smoke of cigarettes; (vii) investigating the value of anti-smoking clinics to help those who find difficulty in giving up smoking. We shall, as a minimum, be expected to say whether the Government agree that smoking should be discouraged and accept the specific suggestions. 5. We asked officials to consider the possibilities of a Government publicity campaign, and we attach a note by them at Appendix B, which suggests (a) that a Government campaign could not be limited to " giving the facts " but must go on to give advice (b) that a campaign, to stand any chance of reducing smoking substantially would have to be novel, elaborate and sustained, and (c) that even so, that chance would be much diminished if the Government refrained from taking such other measures to discourage smoking as are open to them. We agree with these conclusions. 6. Most of the specific suggestions made by the Royal College are within the departmental sphere of other Ministers. Thus, of the suggestions in the Report, (ii) and (iv) are for the H o m e Secretary (iii) and (vi) for the President of the Board of Trade, and (v) for the Chancellor of the Exchequer. The Postmaster-General would be also concerned in (iii) as respects television advertising. 7. As regards what lies within our own responsibilities, we intend to intensify health education on this subject, especially in schools and in teacher training colleges, and to endeavour to enlist the co-operation of teachers and parents. This is the least we should do, and we shall be able to mount such action fairly quickly and fairly cheaply—say at the level suggested in paragraph 4 (i) of Appendix B. But we must say plainly that in our opinion no publicity campaign, however costly or elaborate, would by itself have more than a strictly limited effect unless (in the
words of the Officials' Note) " the Government are seen to be taking in addition such other measures as lie to their hand to reduce the present level of consumption of cigarettes ". 8. The matter is clearly one of great social, political and indeed industrial importance, and our colleagues will wish to consider it on broad lines. As the Ministers responsible for the health and education services, we feel that we must urge strongly the case for the Government to use all the practical means in their power to discourage smoking, particularly of cigarettes. J.S.M. D.E. J.E.P. 26th February,
1962.
APPENDIX
A
EXTRACT FROM ROYAL COLLEGER SUMMARY OF THEIR REPORT Conclusions The benefits of smoking are almost entirely psychological and social. It may help some people to avoid obesity. There is no reason to suppose that smoking prevents neurosis. 2. Cigarette smoking is a cause of lung cancer and bronchitis and probably contributes to the development of tuberculosis, coronary heart disease and various other less common diseases. It delays healing of gastric and duodenal ulcers. 3. The risks of smoking to the individual are calculated from the death rates in relation to smoking habits among British doctors. The chance of dying in the next 10 years for a man aged 35 who is a heavy cigarette smoker is 1 in 23 whereas the risk for a non-smoker is only 1 in 90. Only 15 per cent, (one in six) of men of this age who are non-smokers but 33 per cent, (one in three) of heavy smokers will die before the age of 65. Not all this difference in expectation of life is attributable to smoking. 4. large.
The number of deaths caused by diseases associated with smoking is
5. Reduction in general air pollution should reduce the risks of cigarette smoking but it is necessary for the health of the people in Britain that any measures that are practicable and likely to produce beneficial changes in smoking habits shall be taken promptly. Preventive Measures 6. Since it is not yet possible to identify those individuals who will be harmed by smoking, preventive measures must be generally applied. 7. The harmful effects of cigarette smoking might be reduced by efficient filters, by using modified tobaccos, by leaving longer cigarette stubs or by changing from cigarette to pipe or cigar smoking. 8. General discouragement of smoking, particularly by young people, is necessary. More effort needs to be expended on discovering the most effective means of dissuading children from starting the smoking habit. There can be no doubt of our responsibility for protecting future generations from developing the dependence on cigarette smoking that is so widespread to-day. 9. Most adults have heard of the risks of cigarette smoking but remain unconvinced. Doctors, who see the consequences of the habit, have reduced their 60502
cigarette Consumption. Some evidence of concern by the Government is needed to convince the public. The Government have so far only asked local health authorities to carry out health education in respect of smoking, but little seems to have been achieved. The Central Council for Health Education and local authorities spent less than £5,000 on anti-smoking education in 1956-60, while the Tobacco Manufacturers spent £38 million on advertising their goods during this period. Possible Action by the Government 10. Some decisive steps should be taken by the Government to curb the present rising consumption of tobacco, and especially of cigarettes. This action could be taken along the following lines: (i) more education of the public and especially school-children concerning the hazards of smoking; (ii) more effective restrictions on the sale of tobacco t o children; (iii) restriction of tobacco advertising; (iv) wider restriction of smoking in public places; (v) an increase of tax on cigarettes, perhaps with adjustment of the tax on pipe and cigar tobaccos; (vi) informing purchasers of the tar and nicotine content of the smoke of cigarettes; (vii) investigating the value of anti-smoking clinics to help those who find difficulty in giving u p smoking. Doctors and their Patients 11. There are good medical grounds for advising patients with bronchitis, peptic ulcer or arterial diseases to stop smoking. Even a smoker's cough may be an indication that the habit should be given up. Doctors are better able to help their patients to stop smoking if they do not smoke themselves. They have a special responsibiliiv for public education about the dangers of smoking. February
1962.
APPENDIX
SMOKING AND LUNG
B
CANCER-PUBLICITY
N O T E BY OFFICIALS
The Government^ policy hitherto has been to encourage local health authorities to make the facts known, leaving individuals to choose their own course of action. As a result, it appears that a large proportion of the population are aware that there is, or may well be, a causal connection between smoking and lung cancer; but few members of the general public take this seriously or regard the risk as serious in their own particular case, and few appear to have altered their habits as a result. The connection between smoking and other diseases is not generally realised at all. There is no doubt that those local authorities who would themselves have liked to be most active have felt handicapped by the absence of any Government participation in the publicity and of any Government expression of view. 2. The Royal College's Report contains little that is new in the way of scientific evidence. It pulls together the existing evidence and authoritatively appraises it. It will attract publicity and have some effect on some people. But it will not enable the health education efforts of local authorities to be much more effective than at present. If any real and lasting impression is to be made on the public mind, the Government will have to sponsor, and indeed conduct, a campaign. 3. We were asked to consider whether it would be possible for a Government campaign to be limited to " giving the facts " without also " giving advice ". We
do not think it would. The " f a c t s " are not in themselves sufficiently clear, striking and unqualified to make a telling impact without explanation, comment and derivative judgment (" smoking is a cause . . . " " much higher chance of death . ", etc.). And even if they were, it is not practicable for the Government merely to stress facts without giving, or implying, an opinion that people should do something about them. Every Government publicity campaign—diphtheria, road safety, service recruiting—aims to guide the public towards a particular course of action or the acquisition of a particular habit. 4. We have looked at the possible content of a Government publicity campaign on the conventional lines at three levels of cost: (i) Cost £20,000—covering posters, leaflets, filmlets for use by local authorities, schools and interested bodies, etc., addressed to a selected public, especially the young. (ii) Cost £125,000—covering (i) plus Press and television advertising for a limited period (2-3 weeks), addressed to the general public, (hi) Cost £1 mijlion—covering Press and television advertising extending over a year, plus posters on hired hoardings. 5. To start one of these campaigns might provide the Government with a defensive position against those who urge that it is the Governmenfs duty to be up and doing. But we do not think that even the most expensive of them would in itself make any large and lasting difference to smoking habits. 6. If the Government regard it as their duty to induce such a difference— that is, to put the authority of the State behind an attempt to reduce substantially and permanently the consumption of cigarettes—then something more and different will be needed. 7. First, the force of example must be recognised, and the Government must address themselves to those categories who are specially well placed to influence others. Of these, perhaps the most important are doctors, teachers and parents. 8. As the Report shows, doctors have markedly reduced their own smoking since the scientific data first became convincing to those best able to understand them. It should be possible to stimulate doctors, through their own organisations, both to alter their own habits and to advise their patients to do so. (Incidentally, posters and leaflets in doctors' surgeries would be a cheap and effective medium for publicity.) 9. It would clearly be desirable to persuade children not to take up smoking at all. To them the risk appears far off as well as slight, and smoking is an attractive sign of maturity. The task of persuasion is therefore difficult, particularly if parents and others with whom they are in daily contact not only smoke themselves but allow, and even encourage, the children to smoke too. The task would be quite impossible, without the whole-hearted co-operation of schools. It would therefore be necessary to attempt to persuade teachers that it was their duty not only to plug anti-smoking propaganda in the schools but also to add example to precept. 10. The campaign would therefore need careful preparation among " influential" classes and their professional organisations, and the above would be only some of the steps needed. The campaign, once launched, would have to be carried on, at considerable intensity and for a long period, through all publicity media—of which television would perhaps be the most effective as well as the most expensive. And large numbers of people from many walks of life would have to be recruited in order to play a part. The cost would be considerable—not less than £1 million a year. 11. It must be recognised that such a campaign would be attempting what no national publicity campaign has ever attempted before—a big change in a strongly ingrained social habit, with no recommended substitute. It seems more than doubtful whether it would stand much chance of success unless the Government were seen to be taking in addition such other measures as lie to their hand to reduce the present level of consumption of cigarettes. February
1962.
ANNEX B
D R A F T A N S W E R F O R USE BY T H E M I N I S T E R O F H E A L T H ON 12th M A R C H The Secretary of State for Scotland and I will shortly be asking the local health authorities to use all channels of health education to make the conclusions of the Report known and to discourage smoking on health grounds, particularly of cigarettes. We shall be giving them guidance and providing them with publicity material. We are also consulting with the Central and Scottish Councils for Health Education about ways in which they can help. As regards health education in the schools, my Rt. Hon. Friend the Minister of Education is answering another Question on that subject to-day.
D R A F T A N S W E R F O R USE BY T H E M I N I S T E R O F E D U C A T I O N ON 12th M A R C H The Secretary of State for Scotland and I propose to draw the attention of the local education authorities to this Report and to seek their co-operation and that of the teaching profession and of all those who work with school children and young people in making clear to them through all the means at their disposal the dangers to their future health of smoking, particularly cigarettes, and to discourage the formation of the smoking habit. It is my intention to publish separately a revised version of the section in the Ministry's pamphlet " Health Education " which deals with the dangers of smoking incorporating material from this Report and to consider with all those concerned what further assistance I can usefully give. My Rt. Hon. Friend is taking corresponding steps in Scotland.
& ii
0
i s DOCUMENT IS T H E P R O P E R T Y O F H E R B R I T A N N I C M A J E S T Y ' S G O V E R N M E N T )
C.J6 2 ^ 4 4 2nd M a r c h , 1962
CABINET
BIRMINGHAM:
LAND F O R . H O U S I N G
M e m o r a n d u m by t h e M i n i s t e r of H o u s i n g a n d L o c a l G o v e r n m e n t and M i n i s t e r for W e l s h A f f a i r s
At a m e e t i n g on 1st A u g u s t , 1961 t h e C a b i n e t c o n s i d e r e d a report from a Committee under Lord Mills concerning B i r m i n g h a m ' s housing needs. Among other m e a s u r e s then put f o r w a r d was the b u i l d i n g of h o u s e s on 600 a c r e s at W y t h a l l , an a r e a w i t h i n t h e County C o u n c i l ' s G r e e n B e l t p r o p o s a l s ( C . C (61) 46th C o n c l u s i o n s , M i n u t e 6). M y c o l l e a g u e s v/ill w i s h to k n o w t h a t , in t h e l i g h t of s t r e n u o u s l o c a l o p p o s i t i o n a n d t h e t e r m s of rny I n s p e c t o r ' s r e p o r t following a p u b l i c l o c a l e n q u i r y , I n o w f e e l u n a b l e t o a p p r o v e t h e p r o p o s e d development at Wythall and a m m a k i n g a public a n n o u n c e m e n t to t h i s effect. I h a v e d i s c u s s e d t h i s d e c i s i o n w i t h L o r d M i l l s , who h a s a c c e p t e d t h e n e c e s s i t y f o r i t .
C. H.
M i n i s t r y of H o u s i n g and L o c a l G o v e r n m e n t , S. W. 1, 1st M a r c h , 1962
2
['1 I
PHIS DOCUMENT 15 T H E P R O P E R T Y O F H E R B R I T A N N I C M A J E S T Y ' S G O V E R N M E N T )
CJ62L45
C O P Y NO.
,
2nd M a r c h , 1962 CABINET
T j ^ E F F E C T ON H O U S E H O L D E R S . O F R E V A L U A T I O N F O R R A T E S IN 1963 M e m o r a n d u m b y t h e C h a n c e l l o r of t h e Duchy of L a n c a s t e r
I a g r e e with t h e g e n e r a l c o n c l u s i o n r e a c h e d b y t h e M i n i s t e r of H o u s i n g and L o c a l G o v e r n m e n t i n C . ( 6 2 ) 33 t h a t t h e o v e r a l l r e s u l t of t h e v a l u a t i o n f o r r a t e s in 1963 i s c o m f o r t i n g . But t h i s , of c o u r s e , d o e s n ' t h e l p t h o s e who a r e on t h e w r o n g s i d e of t h e a v e r a g e a n d it i s unfortunate that t h e s e p l a c e s , l a r g e l y s e a s i d e r e s o r t s , a r e t h o s e in w h i c h we h a v e a p a r t i c u l a r i n t e r e s t . I entirely a g r e e that no case c a n b e m a d e out f o r a g e n e r a l d e - r a t i n g o r d e r b u t i t s e e m s t o m e that t h e r e a r e v e r y strong a r g u m e n t s indeed for making some p r o v i s i o n w h e r e the change in the h o u s e h o l d e r s s h a r e a m o u n t s to m o r e t h a n s a y 10 p e r c e n t . T h i s would i n v o l v e thx-ee c o u n t i e s a n d s e v e n c o u n t y b o r o u g h s , a l i s t of w h i c h , t o g e t h e r w i t h t h e p e r c e n t a g e i n c r e a s e s , is annexed. 2. T h i s r e v a l u a t i o n f i r s t t a k e s p r a c t i c a l effect in 1 9 6 3 / 6 4 a n d I would s u g g e s t t h a t we s h o u l d t a p e r t h e i n c r e a s e t o t h e h o u s e h o l d e r s o v e r a p e r i o d of p e r h a p s t h r e e y e a r s . C e r t a i n l y we w i l l be e x p e c t e d t o do t h i s . It i s q u i t e t r u e , a s t h e M i n i s t e r ' s p a p e r s a y s , t h a t h i s p r e d e c e s s o r t o l d t h e H o u s e t h a t an i n c r e a s e of 33-j p e r c e n t would b e i n t o l e r a b l e b u t I do not t a k e t h i s t o m e a n t h a t a n y t h i n g l e s s t h a n t h i s s h o u l d n o t attx'act d e - r a t i n g . When t h e t h e n M i n i s t e r of H o u s i n g s p o k e a t R h y l on 18th F e b r u a r y , 1961, h e s a i d ; " S e c o n d l y , we a r e t a k i n g p o w e r t o a p p l y a m e a s u r e of d e - r a t i n g to h o u s e h o l d e r s , s o a s t o p r o t e c t t h e m a g a i n s t the n a s t y jolt they would o t h e r w i s e h a v e on t h e i r r a t e s if we left t h e e x i s t i n g l a w t o r u n on u n c h a n g e d . I cannot tell yet what the p e r c e n t a g e of d e - r a t i n g v/ill b e , b e c a u s e we c a n n o t s a y w h a t v/ill b e n e c e s s a r y u n t i l we s e e t h e p r e l i m i n a r y f i g u r e s of t h e n e w v a l u a t i o n ? and t h o s e f i g u r e s c a n n o t b e r e a d y b e f o r e n e x t year. I h o p e we m a y b e a b l e t o a p p l y t h e s a m e u n i f o r m p e r c e n t a g e of d e - r a t i n g t o a l l h o u s e s everywhere. " B u t t h e f i g u r e s m a y s h o w t h a t i t w o u l d be f a i r e r t o fix d i f f e r e n t p e r c e n t a g e s in d i f f e r e n t c o u n t i e s o r county b o r o u g h s , a n d we a r e t a k i n g p o w e r t o do t h a t if n e e d b e . We c e r t a i n l y i n t e n d to s e e t h a t it i s f a i r t o e v e r y b o d y . "
We m a d e g r e a t u s e of t h i s q u o t a t i o n s u b s e q u e n t l y in p a m p h l e t s and i n a s p e c i a l l e a f l e t . I a m c e r t a i n we w i l l be e x p e c t e d to m o v e a c c o r d i n g l y in a s m a l l n u m b e r of p l a c e s and I f e e l t h a t it w o u l d b e w i s e t o o p e r a t e S e c t i o n (2) of t h e R a t i n g and V a l u a t i o n A c t , 1961, accordingly. T h i s would e n t a i l a n o r d e r b e i n g l a i d b e f o r e t h e House.
I.M.
Office of t h e C h a n c e l l o r of t h e Duchy of L a n c a s t e r , S. W. 1. 2nd M a r c h , 1962.
ANNEX
E N G L A N D AND W A L E S
Approximate increase injaouseholders' share of e x p e n s e s ,
A d m i n l strative
Countie s
Berkshire Dorset I s l e s of S c i l l y
U 13 18
County Boroughs 2
Blackpool Bournemouth Brighton Bristol Eastbourne Southport Stockport
0
2
' 15 1 4
15 l^ 13
-2
COPY NO.
Gj,6^1i6
5th M a r c h , 1962
CABINET
T H E E F F E C T ON H O U S E H O L D E R S O F
I ^ Y A L J ^ T j O N j F o R R A T E S IN 196;3 M e m o r a n d u m b y t h e Chief S e c r e t a r y t o t h e T i - e a s u r y and P a y m a s t e r - G e n e r a l
I h o p e t h e M i n i s t e r of H o u s i n g a n d L o c a l G o v e r n m e n t w i l l f o r g i v e m e if I r e f e r t o t h e p a p e r C. (62) 45 c i r c u l a t e d by t h e C h a n c e l l o r of t h e D u c h y of L a n c a s t e r a n d t h e e x t r a c t q u o t e d t h e r e i n f r o m a s p e e c h of m i n e a t R h y l w h e n I w a s t a k i n g t h e R a t i n g a n d V a l u a t i o n B i l l of 1961 through Parliament. 2 E a r l i e r in t h a t s p e e c h I h a d m a d e c l e a r t h a t w h a t t h e G o v e r n m e n t would n o t a l l o w w a s an i n c r e a s e of 33-f p e r c e n t o r m o r e i n t h e s h a r e of t h e t o t a l r a t e b u r d e n f a l l i n g on h o u s e h o l d e r s n a t i o n a l l y . T h e r e f e r e n c e w a s t o t h e n a t i o n a l f i g u r e , n o t t o t h e figure i n a n y p a r t i c u l a r town or county. B u t t h e C h a n c e l l o r of t h e Duchy i s p e r f e c t l y r i g h t i n t h i n k i n g t h a t n e i t h e r t h e r e n o r on a n y o t h e r o c c a s i o n d i d I s a y a n y t h i n g to i m p l y t h a t a d e - r a t i n g oz*der w o u l d n o t b e m a d e u n l e s s t h e h o u s e h o l d e r s ' s h a r e r o s e b y 33-1" p e r c e n t n a t i o n a l l y . M y o b j e c t w a s t o r e t a i n c o m p l e t e f r e e d o m of m a n o e u v r e . 0
3. I m u s t state however that everything said during the p a s s a g e of t h e B i l l a b o u t t h e p o w e r t o v a r y t h e p e r c e n t a g e of d e - r a t i n g a s b a t w e s t i one c o u n t y o r c o u n t y b o r o u g h a n d a n o t h e r w a s l i n k e d t o t h e a s s u m p t i o n that t h e r e would h a v e to be a national d e - r a t i n g o r d e r . The p r e s e n t situation - that a national o r d e r will not be n e e d e d , the v a l u e s of c o m m e r c i a l a n d i n d u s t r i a l a n d o t h e r n o n - r e s i d e n t i a l p r o p e r t y having r i s e n far m o r e than anyone had thought p o s s i b l e - would a y e a r ago have s e e m e d too wonderful a political godsend to be t r u e . 4. T h e t a p e r i n g a c t i o n p r o p o s e d by t h e C h a n c e l l o r of t h e D u c h y would, I b e l i e v e , r e q u i r e legislation. The view was taken, when the B i l l w a s g o i n g t h r o u g h , t h a t u n p o p u l a r i t y would b e s h a r p e r b u t m u c h m o r e s h o r t - l i v e d if a m a n ' s r a t e s w e n t up b y ( s a y ) 20 p e r c e n t a l l a t o n c e t h a n if h e l e a r n t t h a t t h e y w e r e t o go up 5 p e r c e n t n e x t y e a r , 5 p e r c e n t t h e y e a r a f t e r , a n d s o on. It w o u l d b e r a t h e r l i k e h a v i n g a finger amputated by d e g r e e s , a joint a y e a r . 5. D u r i n g t h e p a s s a g e of t h e B i l l I t h e r e f o r e e x p l a i n e d to t h e l i b u s e t h a t , if a d e - r a t i n g o r d e r w a s m a d e , it w o u l d r e m a i n in f o r c e £feueoughout t h e five y e a r s up t o t h e n e x t r e v a l u a t i o n (1968) a n d w o u l d then lapse, unless before then fresh legislation had been enacted. -1-
SECRET
6. M y p e r s o n a l v i e w i s t h a t t h e d i s a d v a n t a g e s in m a k i n g a n o r d e r t o shift p a r t of t h e r a t e b u r d e n f o r five y e a r s f r o m t h e h o u s e h o l d e r s of B o u r n e m o u t h , B l a c k p o o l , e t c , on t o t h e h o t e l s , b o a r d i n g h o u s e s , s h o p s a n d i n d u s t r i e s of t h o s e t o w n s w i l l be found t o o u t w e i g h the advantages. Ho B .
T r e a s u r y C h a m b e r s , S, W. 1. 5 t h M a r c h , 1962
Printed for the Cabinet.
C. (62) 47 7th March,
March
1962
.
Copy No.
50
1962
CABINET
I N V E S T M E N T IN T H E P R I V A T E
SECTOR
MEMORANDUM BY THE CHANCELLOR O F THE EXCHEQUER
On 31st January the Economic Policy Committee considered two papers on the possibility of reducing building investment in t h e private sector. The first was by the Minister of Housing and the second was by the Minister of Works. The Committee took the view that a return to building licensing was undesirable; the Prime Minister has now suggested that the Cabinet ought to have a chance to consider the arguments. Arguments F o r 2. The Minister of Housing contends that, although we seek to plan public investment, which accounts for about two-fifths of all new constructional work, our plans are vulnerable to any unexpected increase in the uncontrolled three-fifths accounted for by private investors; existing regulations in the private sector are uncertain and uneven in their effect and what is needed is some permanent method of programming work in the private sector just as much as in the public: whatever decisions are taken on the growth of public service investment we do want to be sure that the agreed programmes can go steadily ahead without being thrown out by a lack of control over the rate of growth of investment in the private sector, which in many cases will contribute less, and be seen to contribute less, to national productivity. 3. If we possessed a control over building there is little doubt that it would have formed a useful part of the armoury against inflation and that, had we had it, this control would have been used in 1956-57 and 1961. Moreover, it is obviously wasteful if the time-gap between starts and completions in the private sector increases—a half-finished factory locks u p resources and makes no positive contribution to our national economic performance. Arguments Against 4. The Minister of Works sees no advantage, and some positive disadvantages, in the introduction of direct building controls. He considers that a system of rationing is unnecessary at a time when, in his view, there is no prospect of heavy overload upon the construction industries. Direct controls could involve elaborate, and onerous, arrangements for collecting information and could be costly and difficult to administer. Moreover, to adopt a restrictive policy would only defer demand for building; not reduce it permanently, and could be quite inappropriate at a time when we are seeking an expansion of the capacity of the construction industries. : 5. Apart from these arguments on substance, it would appear strange for the Government to reintroduce building controls before the National Economic Development Council has started work. Having set up the Council, it would be difficult to decide to make a big change of this sort without the representatives of private industry having a chance to comment. 60506
General Discussion 6. The general view of the Economic Policy Committee was that if; there were any point in reducing the rate of growth in the programmes for housing and other public service investment it was not because of the danger of the overload on the building industry, but because of the need to prevent the continued rise in the proportion of national resources going into the public sector. This would otherwise be likely to interfere with the primary task of making the private sector more competitive in export markets. Having once decided to use monetary measures to restrain excessive demand in the economy, it would be unwise to seek different remedies as soon as difficulties appeared. 7. The Committee accordingly agreed that no further study should be made of possible systems of building licensing but they took note of the difficulties which might arise from local overloading, and supported the suggestion that the building industry itself should be encouraged towards voluntary co-operation in avoiding this danger. T h e Committee also recognised that there was an entirely separate planning problem arising out of the increasing congestion of London and other major cities on which the Home Affairs Committee are at present awaiting a report. They also called for a report from officials on the co-ordination of building programmes in the public sector in order to avoid local overloading on the building industry.
My Own Views 8. W e have had discussions about all this over a period of years, but I am bound to say that the arguments for any form of building control seem to me to be no stronger now than at any other time. 9. The main argument advanced in favour of direct controls is that restraint of inessential investment in the private sector will release resources for essential investment in the public sector. This seems to me untrue in the long term and, in so far as it is true in the short term, to be outweighed by counter arguments. What principally determines the volume of public service investment in the long term are the economic resources available, not the capacity of the construction industries. It does not follow that, if the load upon the construction industries is reduced, the size of the public service investment programmes can be increased. What matters is the amount of economic resources which can be spared for public service investment, given the many competing claims upon the nation's resources. 10. On the other hand I am more ready to agree that in periods of overload on the construction industries restriction of private demand, whether by direct controls Or other means, will release real resources and permit implementation of some public programmes to go ahead more quickly in the short term than would otherwise be the case. But I see considerable difficulties to attempting this form of regulation by direct building controls. In particular I would name the following: (a) Direct controls would be expensive to administer. Large numbers of new staff would be needed both at the centre and in the regions and elaborate machinery would be needed for the collection of information. The machine would be out of proportion to the purpose to be served. (b) Direct controls would also be very difficult to administer. Areas where the construction industries are under such heavy pressure as to justify regulation of private building are hard to define satisfactorily and the problem of what criteria to apply in controlling private building is a very real one. For example office building has been suggested as a form of construction conspicuously in need of control. But it can be argued, very plausibly, that offices are as important a part of a modern expanding economy as, for example, factories. With technological advance it is expected that an increasing proportion of the working population will be employed at desks, and a decreasing proportion at benches. Moreover, offices have not been overdeveloped. Demand has been running ahead of supply. A similar case could be advanced for shops, garages and many other forms of miscellaneous building.
(c) There are also the practical difficulties of introducing new controls. Legislation must be secured and the large administrative machine set up. Even if decisions were taken now, any new scheme would be unlikely to be in effective operation before well into 1963, and in this interval there would, almost certainly, be a scramble in the private sector to get building work started before the controls took effect. This would inevitably have a disruptive effect on the implementation of public sector programmes. In other words the purpose of controls would be defeated, or at least frustrated, in the interval before their introduction. Could not this period be better devoted to the initiation of positive measures to encourage and promote productivity in the construction industries? 11. I attach much importance to this last point. I am sure that at the present time our first objective must be to promote increases in the capacity and efficiency of the construction industries, to encourage new building techniques and a new attitude to the training of skilled labour. Useful moves have already been made in this direction. But to introduce direct controls would be to move in quite the opposite direction. To single out the construction industries for the application of restrictive physical controls must have a harmful effect upon the new attitudes we are endeavouring to foster; and to cut down deliberately the most profitable form of construction must divert capital resources from the industries to other parts of the economy. Our aim must be to make construction a major growth industry and we must seek to achieve this by positive means. 12. I therefore invite my colleagues to confirm the conclusion of the Economic Policy Committee that no further study should be made of possible systems of building licensing, and to take note that the Committee asked that studies should be carried out on the co-ordination of investment to prevent local overload upon the construction industries. 13. My colleagues may also care to consider the development of systems of control, similar to those which are used for factory building, for the purpose of controlling office and other building in the middle of cities and in the great conurbations. There is a good deal to be said for this as a matter of town planning policy, for the location of services is just as important as the location of industry. But it might be better to delay examination of this proposal until after the Home Affairs Committee have received the report which is being prepared on the possibility of planning measures to relieve the increasing congestion of London and other major cities. S. L.
Treasury Chambers, S.W. 1,
6th March, 1962.
SIS D O C U M E N T IS T H E P R O P E R T Y O F H E R B R I T A N N I C MAJESTY*'S G O V E R N M E N T )
C.(62) 48
COPY NO.
CABINET
.M^racxa£dmn^y^j^^
I c i r c u l a t e f o r t h e i n f o r m a t i o n of m y c o l l e a g u e s a n o t e on t h e f o r t h c o m i n g D i s a r m a m e n t T a l k s a t G e n e v a b y t h e M i n i s t e r of S t a t e , F o r e i g n Office, ( M r . G o d b e r ) .
H.
F o r e i g n Office, S. W . l . 7th M a r c h , 1962.
DISARMAMENT Note b y t h e M i n i s t e r of S t a t e for^ F o r e i g n A f f a i r s
T h e 1 8 - P o w e r D i s a r m a m e n t C o m m i t t e e o p e n s i n G e n e v a on 14th M a r c h (a l i s t of t h e n a t i o n s p a r t i c i p a t i n g i s g i v e n i n t h e A p p e n d i x ) . T h e y h a v e b e e n a s k e d b y t h e U n i t e d N a t i o n s G e n e r a l A s s e m b l y to b a s e t h e i r d i s c u s s i o n s on t h e p r i n c i p l e s a g r e e d b e t w e e n t h e U n i t e d S t a t e s a n d t h e S o v i e t Union a t N e w Y o r k in S e p t e m b e r , 1961. ( T h e t e x t , and t h e v e r y i m p o r t a n t U n i t e d S t a t e s r e s e r v a t i o n , a r e a l s o g i v e n in t h e A.ppendix, ) T h e p r i n c i p l e s a n d t h e r e s e r v a t i o n b e t w e e n t h e m a d e q u a t e l y c o v e r t h e p r i n c i p l e s s e t out in t h e S t a t e m e n t by C o m m o n w e a l t h P r i m e M i n i s t e r s , i s s u e d in M a r c h , 1961, to w h i c h H e r M a j e s t y ' s G o v e r n m e n t r e m a i n of c o u r s e c o m m i t t e d . The 18-Power C o m m i t t e e h a v e a l s o b e e n a s k e d by t h e U n i t e d N a t i o n s G e n e r a l A s s e m b l y t o r e p o r t on p r o g r e s s b y 1st J u n e t o t h e " D i s a r m a m e n t C o m m i s s i o n " of t h e U n i t e d N a t i o n s (which c o n s i s t s of a l l P o w e r s r e p r e s e n t e d in t h e General Assembly). 2. T h e We s t e r n p o s i t i o n f o r t h e c o m i n g d i s a r m a m e n t t a l k s i s b a s e d on t h e U n i t e d S t a t e s D i s a r m a m e n t P r o g r a m m e , p r e s e n t e d b y P r e s i d e n t Kennedy to the United Nations G e n e r a l A s s e m b l y -1
in S e p t e m b e r , 1961. "We p l a y e d a c o n s i d e r a b l e p a r t o u r s e l v e s in t h e d r a f t i n g of t h i s . T h e R u s s i a n p o s i t i o n w i l l be b a s e d , so f a r a s we k n o w , on t h e i r D i s a r m a m e n t P l a n p r e s e n t e d to t h e U n i t e d N a t i o n s G e n e r a l A s s e m b l y in S e p t e m b e r , I 9 6 0 , (though t h e y m a y s t i l l c o m e f o r w a r d with a new plan. T h e m a i n d i f f e r e n c e s b e t w e e n t h e two a r e : (i) The R u s s i a n p r o v i s i o n for fixed t i m e l i m i t s (four y e a r s for t h e w h o l e p r o c e s s of d i s a r m a m e n t ) , (ii) R u s s i a n i n s i s t e n c e t h a t " f o r e i g n b a s e s " s h o u l d b e
e v a c u a t e d in t h e f i r s t s t a g e of t h e i r p l a n , a n d
foreign troops withdrawn from Europe as a
preliminary measure.
(iii) R u s s i a n p r o v i s i o n t h a t a l l n u c l e a r d e l i v e r y v e h i c l e s , without distinction between " s t r a t e g i c " and " t a c t i c a l " , s h o u l d b e d e s t r o y e d in t h e f i r s t s t a g e . (iv) U n i t e d S t a t e s p r o v i s i o n f o r a " c u t - o f f " of p r o d u c t i o n of f i s s i o n a b l e m a t e r i a l f o r w e a p o n s p u r p o s e s i n the f i r s t s t a g e (the R u s s i a n s p r o v i d e f o r a s e c o n d s t a g e cut-off o n l y ) . (v) R u s s i a n i n s i s t e n c e ( m a d e c l e a r e r in s u b s e q u e n t m e m o r a n d a t h a n in t h e i r p l a n ) t h a t " c o n t r o l " o r "verification" should apply only to the d e s t r u c t i o n of a g r e e d q u a n t i t i e s of w e a p o n s , a n d t h a t t h e r e s h o u l d b e no c h e c k on t h e s t o c k s r e m a i n ing, or the new weapons produced, after destruction. (vi) U n i t e d S t a t e s i n s i s t e n c e t h a t t h e l a t e r s t a g e s of d i s a r m a m e n t s h o u l d be a c c o m p a n i e d b y t h e r a p i d d e v e l o p m e n t of e f f e c t i v e i n t e r n a t i o n a l p e a c e keeping m a c h i n e r y , including an effective i n t e r national peace-keeping force. 3. The R u s s i a n p r o p o s a l s a r e quite unacceptable to u s , p r i n c i p a l l y b e c a u s e of t h e i r p o s i t i o n on v e r i f i c a t i o n ; t h e i r e f f o r t t o r e s t r i c t o u r d e p l o y m e n t b y d e m a n d i n g t h e e v a c u a t i o n of f o r e i g n b a s e s and t r o o p s ; and t h e i r p r o p o s a l to abolish the n u c l e a r d e t e r r e n t c o m p l e t e l y a t an e a r l y s t a g e . In s p i t e (or b e c a u s e ) of t h i s , t h e i r plan has considerable appeal to thoughtless or frightened people every where. It i s p o s s i b l e t h a t t h e S o v i e t G o v e r n m e n t a r e g e n u i n e l y i n t e r e s t e d i n s o m e m e a s u r e of n u c l e a r d i s a r m a m e n t , in o r d e r to a v o i d t h e b u r d e n a n d r i s k s of a n a r m s r a c e w h i c h t h e y c a n n o t b e a r t o l o s e a n d m a y w e l l be u n a b l e t o a f f o r d t o win. But, w h a t e v e r t h e i r u l t i m a t e i n t e n t i o n s , it i s m o s t l i k e l y t h a t t h e opening s t a g e s of t h e Geneva Conference will w i t n e s s an i n t e n s e p r o p a g a n d a effort by the R u s s i a n s to sell t h e i r existing plan, or something like it, to the u n c o m m i t t e d p a r t i c i p a n t s and to w o r l d opinion, and to d i s c r e d i t the United States D i s a r m a m e n t P r o g r a m m e .
91
ki if
4. "Whether t h e G e n e v a C o n f e r e n c e is to d e g e n e r a t e into, a p r o p a g a n d a b a t t l e , t h e r e f o r e , o r , a s i s p o s s i b l e , to open t h e w a y u l t i m a t e l y t o s o m e l i m i t e d p o s i t i v e s t e p s , o u r own t a s k s h o u l d r e m a i n t h e s a m e : t o s h o w t h a t t h e R u s s i a n p l a n s a r e full of c o n t r a d i c t i o n s a n d d e s i g n e d t o give t h e m s e l v e s o n e - s i d e d a d v a n t a g e s , t o s h o w t h a t o u r own a r e by c o n t r a s t s o b e r , r e a l i s t i c a n d f a i r , a n d a b o v e a l l t o show that o u r s p r o v i d e at a v e r y e a r l y stage for s o m e i m p o r t a n t c o n c r e t e m e a s u r e s of d i s a r m a m e n t . A l l t h i s i s n e c e s s a r y if t h e R u s s i a n p l a n s a r e to be r e j e c t e d a n d if we a r e e i t h e r ( a t b e s t ) to m a k e s o m e r e a l p r o g r e s s o r (at l e a s t ) t o h a v e m a d e it c l e a r t o t h e w o r l d t h a t we h a v e m a d e a g r e a t and r e a l effort to b r e a k the deadlock. 5. How do we s t a n d a t p r e s e n t ? B r i e f l y , our p r e p a r a t i o n s for defensive or c o u n t e r - a t t a c k i n g a r g u m e n t a r e good. Our p r e p a r a t i o n s f o r a b o l d a n d p o s i t i v e i n i t i a t i v e a t an e a r l y s t a g e of t h e C o n f e r e n c e a r e sadly inadequate. O v e r t h e l a s t m o n t h we h a v e h a d t w o s e r i e s of m e e t i n g s of t h e " W e s t e r n F i v e " ( U n i t e d K i n g d o m , U n i t e d S t a t e s , C a n a d a , F r a n c e , Italy) a t e x p e r t a n d h e a d s of d e l e g a t i o n l e v e l t o p r e p a r e our p o s i t i o n for t h e C o n f e r e n c e . The United States D i s a r m a m e n t A g e n c y h a v e p r o d u c e d an a d m i r a b l y t h o r o u g h a n d c l e a r s e r i e s of p a p e r s e l a b o r a t i n g d e f e n s i v e p o s i t i o n s on a l l t h e m e a s u r e s p r o p o s e d for t h e f i r s t s t a g e of t h e i r D i s a r m a m e n t P r o g r a m m e , a n d t o a l e s s e r e x t e n t on p r o c e d u r e a n d t a c t i c s f o r t h e C o n f e r e n c e . T h e s e h a v e b e e n s u p p l e m e n t e d by p a p e r s f r o m the U n i t e d K i n g d o m a n d o t h e r delegations and have given r i s e to useful d i s c u s s i o n s . The h a r d f a c t r e m a i n s h o w e v e r t h a t we a r e n o t y e t in a p o s i t i o n t o give t o t h e G e n e v a C o n f e r e n c e c o n c r e t e p r o p o s a l s on t h e m o s t c r u c i a l c a t e g o r i e s of d i s a r m a m e n t o r p r e l i m i n a r y m e a s u r e s - r e d u c t i o n of s t r a t e g i c d e l i v e r y v e h i c l e s f o r n u c l e a r w e a p o n s , r e d u c t i o n of " o f f e n s i v e " t y p e s of c o n v e n t i o n a l w e a p o n s , cut-off of f i s s i o n a b l e m a t e r i a l s , a n d a n e w v e r s i o n of t h e n u c l e a r t e s t b a n t r e a t y ; n o r c a n we y e t p r o p o s e a n y c o n c r e t e a n d f r e s h i d e a s t o b r e a k t h e p r e s e n t d e a d l o c k on i n s p e c t i o n a n d v e r i f i c a t i o n . 6. There are mitigating factors. T h e U n i t e d S t a t e s in official d i s c u s s i o n s h a v e p r o m i s e d t o p r o d u c e c o n c r e t e i d e a s in t h e s e f i e l d s urgently. P r e s i d e n t K e n n e d y , in h i s b r o a d c a s t of 2 n d M a r c h , i n d i c a t e d t h a t a t t h e G e n e v a C o n f e r e n c e t h e U n i t e d S t a t e s w o u l d offer, a p a r t from a test ban t r e a t y , "specific p r o p o s a l s for fair and e n f o r c e a b l e a g r e e m e n t s t o h a l t t h e p r o d u c t i o n of f i s s i o n a b l e m a t e r i a l s a n d t o t r a n s f e r t h e m f r o m w e a p o n s t o c k p i l e s t o p e a c e a b l e u s e s - to d e s t r o y the w a r h e a d s and d e l i v e r y s y s t e m s that t h r e a t e n m a n s e x i s t e n c e - t o c h e c k t h e d a n g e r s of s u r p r i s e o r a c c i d e n t a l a t t a c k - t o r e s e r v e o u t e r s p a c e for p e a c e f u l u s e - a n d p r o g r e s s i v e l y t o r e d u c e a l l a r m e d f o r c e s in s u c h a w a y a s t o r e m o v e a l l t h r e a t s a n d t h o u g h t s of war". The United States a u t h o r i t i e s have a l s o m a d e it c l e a r that, at the F o r e i g n M i n i s t e r s ' Meeting before the C o n f e r e n c e , they would h o p e t o s t e e r t h e w o r k of t h e C o n f e r e n c e t o w a r d s t h e following subjects: 1
(i) H a l t i n g of n u c l e a r t e s t s . (ii) C h e c k i n g t h e p r o l i f e r a t i o n of i n d e p e n d e n t n a t i o n a l
nuclear capabilities.
X
(iii) P r e v e n t i n g t h e e x t e n s i o n of t h e a r m s r a c e t o o u t e r
space.
(iv) D e a l i n g u r g e n t l y with t h e m e a n s of l i m i t i n g a n d
r e d u c i n g s t r a t e g i c delivery s y s t e m s for n u c l e a r
weapons.
(v) M e a s u r e s to p r e v e n t s u r p r i s e a t t a c k . T h e y h a v e t o l d u s t h a t on (i), (iii) and (v) t h e y h a v e d e f i n i t e if l i m i t e d , p r o p o s a l s to put forward. It i s t o b e h o p e d t h a t t h e s a m e w i l l soon b e t r u e of (ii) a n d ( i v ) . 7. We felt s o m e difficulty i n i t i a l l y in p r e s s i n g t h e U n i t e d S t a t e s t o o h a r d to produce further p r o p o s a l s . T h e r e s p o n s i b i l i t y for a v e r y h i g h p r o p o r t i o n of W e s t e r n a r m a m e n t s i s t h e i r s . They have a c o r r e s p o n d i n g r e s p o n s i b i l i t y in t h e field of d i s a r m a m e n t . They have, w i t h t h e i r g r e a t r e s o u r c e s of m a n p o w e r , p u t a g r e a t d e a l of v e r y u s e f u l w o r k into d i s a r m a m e n t p l a n s a n d p a p e r s . And the D i s a r m a m e n t A d m i n i s t r a t i o n a l m o s t c e r t a i n l y h a v e g r e a t d i f f i c u l t i e s with t h e P e n t a g o n when t h e y g e t down t o c o n c r e t e p r o p o s a l s f o r r e d u c t i o n s . H o w e v e r , i n l a s t w e e k ' s m e e t i n g s a t W a s h i n g t o n we p r e s s e d t h e A m e r i c a n s v e r y h a r d t o c o m e up with f i r m p o s i t i o n s , a n d M r . A r t h u r D e a n (who w i l l l e a d t h e U n i t e d S t a t e s d e l e g a t i o n a t G e n e v a w h e n t h e S e c r e t a r y of S t a t e , M r . D e a n R u s k , i s n o t p r e s e n t ) u n d e r t o o k t h a t c e r t a i n of t h e k e y p a p e r s w o u l d be a v a i l a b l e on 11th M a r c h for d i s c u s s i o n a m o n g t h e " W e s t e r n F i v e " a t G e n e v a . The M i n i s t r y of D e f e n c e h a v e a l s o b e e n s t u d y i n g t h e k e y q u e s t i o n s of d e l i v e r y v e h i c l e s and s a m p l e inspection. In t h e m e a n t i m e we h a v e s u f f i c i e n t g e n e r a l o r d e f e n s i v e m a t e r i a l to k e e p o u r d e l e g a t e s going a t t h e C o n f e r e n c e ( p a r t i c u l a r l y a s t h e o p e n i n g r o u n d of s p e e c h e s i s l i k e l y
to b e c o n c e r n e d m a i n l y with g e n e r a l i t i e s a n d p r o p a g a n d a ) .
8. A l l t h i s h o w e v e r d o e s not t a k e u s v e r y f a r . We n e e d a
s u b s t a n t i a l " p a c k a g e " of p r o p o s a l s to p u t to t h e C o n f e r e n c e a t a
f a i r l y e a r l y s t a g e , in o r d e r t o d e m o n s t r a t e good f a i t h , a n d t o s h o w
t h a t we a r e m a k i n g a g r e a t effort t o a c h i e v e s u c c e s s a t t h e
Conference. A n d of c o u r s e we s h a l l n e e d s o m e t h i n g t o p u t t o t h e
Soviet F o r e i g n M i n i s t e r , M r . Gromyko, at the p r e l i m i n a r y meeting
of F o r e i g n M i n i s t e r s . To t a k e t h e l o n g e r - t e r m p r o b l e m f i r s t , it i s
m o r e i m p o r t a n t t o p u t s o m e t h i n g s u b s t a n t i a l on t h e t a b l e t h a n t o p u t
s o m e t h i n g t h e r e i m m e d i a t e l y , and we m u s t be c a r e f u l in a n y c a s e
n o t to p r o p o s e p a r t i a l m e a s u r e s in s u c h a w a y . a s t o give t h e
a p p e a r a n c e of s h y i n g a w a y f r o m the i d e a of " g e n e r a l a n d c o m p l e t e
disarmament". A t t h e s a m e t i m e , we m u s t n o t a l l o w t h e R u s s i a n s
t o g e t i n a h e a d of u s w i t h an a t t r a c t i v e " p a r t i a l " o f f e r , a f t e r t h e y
have a l s o m a d e the running with e y e - c a t c h i n g s c h e m e s for " g e n e r a l
and complete d i s a r m a m e n t " . O u r d e l e g a t i o n s m u s t in f a c t be in a
p o s i t i o n to t a b l e t h e i r " p a c k a g e " a t a n y f a v o u r a b l e t i m e a f t e r the
o p e n i n g r o u n d of t h e C o n f e r e n c e .
(iii)
P r e v e n t i n g t h e e x t e n s i o n of t h e a r m s r a c e t o o u t e r - space,
(iv) D e a l i n g u r g e n t l y with t h e m e a n s of l i m i t i n g a n d
r e d u c i n g s t r a t e g i c d e l i v e r y s y s t e m s for n u c l e a r
weapons.
(v) M e a s u r e s to p r e v e n t s u r p r i s e a t t a c k . T h e y h a v e t o l d u s t h a t on (i), (iii) a n d (v) t h e y h a v e d e f i n i t e if l i m i t e d , p r o p o s a l s to p u t f o r w a r d . It i s t o b e h o p e d t h a t t h e s a m e w i l l soon b e t r u e of (ii) a n d (iv). 7. We f e l t s o m e difficulty i n i t i a l l y in p r e s s i n g t h e U n i t e d S t a t e s t o o h a r d to produce further p r o p o s a l s . The r e s p o n s i b i l i t y f o r a v e r y h i g h p r o p o r t i o n of W e s t e r n a r m a m e n t s i s t h e i r s . They have a c o r r e s p o n d i n g . r e s p o n s i b i l i t y in t h e field of d i s a r m a m e n t . They have, w i t h t h e i r g r e a t r e s o u r c e s of m a n p o w e r , p u t a g r e a t d e a l of v e r y u s e f u l w o r k i n t o d i s a r m a m e n t p l a n s and p a p e r s . And the D i s a r m a m e n t A d m i n i s t r a t i o n a l m o s t c e r t a i n l y have g r e a t difficulties with the P e n t a g o n w h e n t h e y g e t down t o c o n c r e t e p r o p o s a l s f o r r e d u c t i o n s . H o w e v e r , i n l a s t w e e k ' s m e e t i n g s a t W a s h i n g t o n we p r e s s e d the A m e r i c a n s v e r y h a r d to c o m e up w i t h f i r m p o s i t i o n s , a n d M r . A r t h u r D e a n (who w i l l l e a d t h e U n i t e d S t a t e s d e l e g a t i o n at G e n e v a w h e n t h e S e c r e t a r y of S t a t e , M r . D e a n R u s k , i s n o t p r e s e n t ) u n d e r t o o k t h a t c e r t a i n of t h e k e y p a p e r s would b e a v a i l a b l e on 11th M a r c h for d i s c u s s i o n a m o n g t h e " W e s t e r n F i v e " at G e n e v a . The M i n i s t r y of D e f e n c e h a v e a l s o b e e n s t u d y i n g t h e k e y q u e s t i o n s of d e l i v e r y v e h i c l e s and s a m p l e inspection. In the m e a n t i m e we h a v e sufficient g e n e r a l o r d e f e n s i v e m a t e r i a l t o k e e p o u r d e l e g a t e s going a t t h e C o n f e r e n c e ( p a r t i c u l a r l y a s t h e o p e n i n g r o u n d of s p e e c h e s i s l i k e l y t o b e c o n c e r n e d m a i n l y v/ith g e n e r a l i t i e s a n d p r o p a g a n d a ) . 8. All this h o w e v e r does not take us v e r y far. We n e e d a s u b s t a n t i a l " p a c k a g e " of p r o p o s a l s to p u t to t h e C o n f e r e n c e at a f a i r l y e a r l y s t a g e , in o r d e r t o d e m o n s t r a t e good f a i t h , a n d to s h o w t h a t we a r e m a k i n g a g r e a t e f f o r t t o a c h i e v e s u c c e s s a t t h e Conference. A n d of c o u r s e we s h a l l n e e d s o m e t h i n g t o p u t to t h e S o v i e t F o r e i g n M i n i s t e r , M r . G r o m y k o , at t h e p r e l i m i n a r y m e e t i n g of F o r e i g n M i n i s t e r s . To t a k e t h e l o n g e r - t e r m p r o b l e m f i r s t , it i s m o r e i m p o r t a n t t o p u t s o m e t h i n g s u b s t a n t i a l on t h e t a b l e t h a n t o p u t s o m e t h i n g t h e r e i m m e d i a t e l y , a n d we m u s t b e c a r e f u l i n a n y c a s e not to p r o p o s e p a r t i a l m e a s u r e s in such a way as to give the a p p e a r a n c e of s h y i n g a w a y f r o m t h e i d e a of " g e n e r a l a n d c o m p l e t e disarmament". At t h e s a m e t i m e , we m u s t not a l l o w t h e R u s s i a n s t o g e t in a h e a d of u s w i t h a n a t t r a c t i v e " p a r t i a l " o f f e r , a f t e r t h e y have a l s o m a d e the running with e y e - c a t c h i n g s c h e m e s for " g e n e r a l and complete d i s a r m a m e n t " . O u r d e l e g a t i o n s m u s t in f a c t b e in a p o s i t i o n t o t a b l e t h e i r " p a c k a g e " a t a n y f a v o u r a b l e t i m e a f t e r the o p e n i n g r o u n d of t h e C o n f e r e n c e .
Z
9. The m o s t i m p o r t a n t t h i n g a t s u c h a t i m e i s t h a t o u r " p a c k a g e "
should h a v e g e n u i n e s u b s t a n c e . It m u s t in m y v i e w c o n t a i n c o n c r e t e
proposals on: (i) R e d u c t i o n of s t r a t e g i c n u c l e a r d e l i v e r y v e h i c l e s . (ii) R e d u c t i o n of m a j o r i t e m s of c o n v e n t i o n a l
armament.
(iii) F o s i t i v e p r o p o s a l s on v e r i f i c a t i o n , a m o n g w h i c h s a m p l e i n s p e c t i o n m a y w e l l b e the m o s t h o p e ful. (iv) Cut-off of p r o d u c t i o n of f i s s i l e m a t e r i a l f o r
military purposes.
(v) T r a n s f e r o r d e s t r u c t i o n of s t o c k p i l e s of f i s s i l e m a t e r i a l for m i l i t a r y p u r p o s e s . (vi) S a f e g u a r d s a g a i n s t t h e t r a n s f e r b e t w e e n n a t i o n s of f i s s i l e m a t e r i a l for s u c h p u r p o s e s . In a d d i t i o n , o u r " p a c k a g e " m i g h t i n c l u d e ( l a r g e l y f o r p r e s e n t a t i o n a l purposes)proposals for: (vii) M e a s u r e s to r e d u c e t h e d a n g e r of s u r p r i s e a t t a c k . (viii) N o n - a g g r e s s i o n d e c l a r a t i o n s by t h e N o r t h A t l a n t i c and W a r s a w P a c t P o w e r s . (ix) S t u d y i n g t h e p o s s i b i l i t y of m i l i t a r y e x p e n d i t u r e in national budgets. 10. The m o s t i m m e d i a t e p r o b l e m i s of c o u r s e w h a t s h o u l d be s a i d to M r . G r o m y k o on 12th M a r c h a b o u t d i s a r m a m e n t p r o b l e m s . O b v i o u s l y we m u s t t a c k l e t h e q u e s t i o n of t h e t r e a t y on b a n n i n g n u c l e a r tests. In o r d e r t o e a s e o u r p o s i t i o n with o u r N o r t h A t l a n t i c A l l i e s (and t o l e a v e t i m e for o t h e r s u b j e c t s ) , we s h o u l d t r y t o confine o u r s e l v e s a s f a r a s p o s s i b l e t o t h e p r o b l e m s of d i s a r m a m e n t in t h e n u c l e a r f i e l d , on w h i c h we h a v e a s p e c i a l r e s p o n s i b i l i t y . But we s h a l l h a v e to be p r e p a r e d f o r M r . G r o m y k o t o r a n g e w i d e l y o v e r t h e f i e l d of d i s a r m a m e n t a s a w h o l e , a n d p a r t i c u l a r l y for an a t t e m p t t o e x p l o r e the p o s s i b i l i t i e s of " n o n - n u c l e a r z o n e s " , d i s e n g a g e m e n t , a n d regiona.,1 l i m i t a t i o n of a r m s . 11. So f a r a s t h e w i d e r s u b j e c t s a r e c o n c e r n e d , we n e e d n o t a t t e m p t to put o v e r s p e c i f i c i d e a s , b u t s h o u l d m e e t M r . G r o m y k o ' s p r o b i n g s with c o u n t e r - q u e s t i o n s o r g e n e r a l s t a t e m e n t s . On n u c l e a r t e s t s , h o w e v e r , it i s e s s e n t i a l t o p u t f o r w a r d o u r own d e t a i l e d p r o p o s a l s , which s h o u l d b e s e e n to r e p r e s e n t s o m e a d v a n c e on o u r d r a f t t r e a t y t e x t of A p r i l , 1961 (this w o u l d be q u i t e p o s s i b l e v/ithout going b e y o n d the p r i n c i p l e s a g r e e d in t h e t r e a t y ) . H e r e the United States situation
2 hJ
is most unsatisfactory. We put t o t h e m r e c e n t l y p r o p o s a l s d e s i g n e d , w i t h i n t h e f r a m e w o r k of t h e d r a f t t r e a t y , to m e e t t h e m a i n R u s s i a n ' o b j e c t i v e s a d v a n c e d a g a i n s t it l a s t s p r i n g , a n d t h u s to l e a v e u s in a good p u b l i c p o s i t i o n . P r e s i d e n t K e n n e d y i n the m e a n t i m e h a s s a i d in h i s t e l e v i s i o n b r o a d c a s t l a s t F r i d a y t h a t we s h o u l d b e o f f e r i n g " n e w m o d i f i c a t i o n s " to our draft t r e a t y at Geneva. Yet of t h e only two m o d i f i c a t i o n s t h a t t h e U n i t e d S t a t e s a u t h o r i t i e s h a v e y e t a g r e e d to one i s d e f i n i t e l y a step backward. The o t h e r , w h i l e v a l u a b l e a n d i n l i n e w i t h o u r own t h i n k i n g , w o u l d be i n s u f f i c i e n t on i t s own to i n t e r e s t t h e R u s s i a n s o r t o s a t i s f y w o r l d opinion t h a t we h a d m a d e a n e w g e s t u r e . 12. T h i n k i n g on t h i s w h o l e p r o b l e m too i s now c o l o u r e d b y n e w scientific evidence which s e e m s to show that national detection s y s t e m s c a n d e t e c t e x p l o s i o n s in a l m o s t a n y e n v i r o n m e n t , a n d c e r t a i n l y in t h e atmosphere. B a s i n g o u r s e l v e s on t h i s we h a v e in a d d i t i o n put f o r w a r d t e n t a t i v e t h o u g h t s t o t h e U n i t e d S t a t e s on t h e p o s s i b i l i t y of r e l y i n g on n a t i o n a l d e t e c t i o n s y s t e m s a t l e a s t in s o m e e n v i r o n m e n t s so l o n g a s we r e t a i n t h e p r i n c i p l e of a n i n t e r n a t i o n a l o r g a n i s a t i o n a n d m o b i l e t e a m s of i n t e r n a t i o n a l i n s p e c t i o n s who c a n be s e n t t o i n v e s t i g a t e any d i s p u t e d n u c l e a r e x p l o s i o n . T h e s e p r o p o s a l s like o u r o t h e r s h a v e m e t a v e r y d i s c o u r a g i n g r e s p o n s e , and i t i s c l e a r t h a t t h o s e in t h e U n i t e d S t a t e s A d m i n i s t r a t i o n who w a n t t o t e s t a r e f i r m l y entrenched. T h e r e is a l s o a v e r y genuine fear about c o n g r e s s i o n a l r e a c t i o n t o a n y w e a k e n i n g of o u r d r a f t t r e a t y p r o v i s i o n s . 13. A p a r t f r o m t h e n u c l e a r t e s t t r e a t y , we m u s t a g r e e on o t h e r i d e a s about n u c l e a r d i s a r m a m e n t , or s u p p l e m e n t a r y m e a s u r e s , which can be put to M r . G r o m y k o . These might cover: (i) T h e n o n - t r a n s f e r of n u c l e a r w e a p o n s to n a t i o n s not p o s s e s s i n g t h e m . (ii) Cut-off of p r o d u c t i o n of f i s s i l e m a t e r i a l f o r
weapons purposes.
(iii) S a f e g u a r d s a g a i n s t t h e t r a n s f e r of f i s s i l e
m a t e r i a l for t h e s e p u r p o s e s .
(iv) S o m e r e d u c t i o n in t h e n u m b e r s of s t r a t e g i c
delivery vehicles.
(v) P r e v e n t i o n of t h e u s e of o u t e r s p a c e f o r m i l i t a r y purposes. On (ii) t o (iv) it i s u n l i k e l y t h a t c o n c r e t e p r o p o s a l s c a n be p r o d u c e d a t t h i s s t a g e , a n d i n a n y c a s e it m a y w e l l b e b e t t e r to p r o d u c e t h e m a s p a r t of a s u b s t a n t i a l " p a c k a g e " t o t h e C o n f e r e n c e . But we s h o u l d b e a b l e t o i n d i c a t e to M r . G r o m y k o t h a t s u b s t a n t i a l p r o p o s a l s w i l l be m a d e in t h e s e c a t e g o r i e s , t o give h i m s o m e i d e a of t h e i r p r o b a b l e c o n t e n t , a n d to a s k f o r h i s own v i e w s . .
-6
14. In s u m , t h e r e f o r e , we a r e e n d e a v o u r i n g t o f i n a l i s e with the United S t a t e s a u t h o r i t i e s i d e a s on n u c l e a r d i s a r m a m e n t t h a t can be d i s c u s s e d with M r . G r o m y k o on 12th M a r c h , a n d a s u b s t a n t i a l " p a c k a g e " of d i s a r m a m e n t m e a s u r e s w h i c h can b e p u t b e f o r e t h e D i s a r m a m e n t C o n f e r e n c e a t a s u i t a b l e s t a g e in p r o c e e d i n g s a f t e r the opening r o u n d of s p e e c h e s .
J . G. M a r c h , 1962.
' APPENDIX.
Governments partic ipat Ing, in the icT-Nation dommitteV NATO' ' ..
United Kingdom United States of Americ; France Canada Italy
Soviet Bloc U'S.S.-R.
0
Bulgaria
Czechoslovakia
Poland
Roumaiiia
Others'
Brazil
Burma
Ethiopia
India
Mexico
.Nigeria
Sweden
United Arab Republic
-
2
1 Joint.Statement of Agreed
Princupl.es for Disarmament Negotiations
1
:
Having conducted an extensive - exchange of views on
disarmament pursuant to their agreement announced in the
General Assembly on 30 March 1961,
Noting with concern that the continuing arms race
is a heavy burden for humanity and is fraught with dangers
for the cause of world peace,
Reaffirming their adherence to all the provisions
of the General Assembly resolution 1378 (XIV) of 20
November 1959,
Affirming that to facilitate the attainment of
general and complete disarmament in a peaceful world
it is important that all States abide by existing
international agreements, refrain from any actions which
might aggravate international, tensions, and that they seek
settlement of all disputes by peaceful means,
The United States and the USSR have agreed to recommend
the following principles as the basis for future
multilateral negotiations on disarmament and to call upon
other States to co-operate in reaching early agreement on
general and complete disarmament in a peaceful world in
accordance with these principles.
1. The goal of negotiations is to achieve agreement
on a programme which will ensure that (a) disarmament
is general and complete and war is no longer an
instrument for settling international problems, and
(b) such disarmament is accompanied by the establishment
of reliable procedures for the peaceful settlement
of disputes and effective arrangements for the
maintenance of peace in accordance with the principles
of the United Nations Charter.
2. The programme for general and complete disarmament
shall ensure that States will have at their disposal
only those non-nuclear armaments, forces, facilities, '
and establishments as are agreed to be necessary to
maintain internal order and protect the personal
security of citizens; and that States shall support and provide agreed manpower for a United Nations peace
force.
3. To this end, the programme for general and
complete disarmament shall contain the necessary to
provisions, with respect to the military establishment
of every nation, for:
(a)
Disbanding of armed forces, dismantling
2 .il 3
- 3 of military establishments, including bases,
cessation of the production of armaments as well,
as their liquidation or conversion to peaceful
uses;
(b) Elimination of all stockpiles of nuclear,
chemical bacteriological, and other weapons of
mass destruction and cessation of the production
of such weapons;
(c) Elimination of all means of delivery of
weapons of mass destruction;.
(d) Abolishment of the organisation and
institutions designed to organise the military
effort of States, cessation of military
-training, and closing of all military training institutions;
(e)
Discontinuance of military expenditures.
4. The disarmament - programme should be implemented in an agreed sequence, by stages until it is completed, with each measure and stage carried oat within specified time-limits. Transition to a subsequent stage in the process of disarmament should take place upon a review of the implementation of measures included in the preceding stage and upon a decision that all such. measures have been implemented and verified and that airy additional verification arrangements required for measures in the next stage are, when appropriate, ready to operate. 5. All measures of general and complete disarmament
should be balanced so that at no stage of the
implementation of the treaty could any State or
group of States gain military advantage and that
security is ensured equally for all.
6. All disarmament measures should be implemented
from beginning to end under such strict and effective
international control as would provide firm assurance
that all parties are honouring their obligations.
During and after the implementation of general and
complete disarmament the most thorough control should
be exercised, the nature and extent of such control
depending on the requirements for verification of the
disarmament measures being carried out in each stage.
To implement control over and inspection of disarmament,
an International Disarmament Organisation including
all parties to the agreement should be created within
the framework of the United Nations. This International
Disarmament Organisation and its inspectors should be
assured unrestricted access without veto to all places
as necessary for the purpose of effective verification.
22 0
A
7, Progress in disarmament- should be accompanied
by measures to strengthen institutions for
maintaining peace and the settlement of international
disputes by. peaceful means. During and after the
implementation of the programme of general and complete
disarmament, there should be taken, in accordance with
the principles of the United Nations Charter, the
necessary measures to maintain international peace
and security, including the obligation of States to
place at the disposal of the United Nations agreed
manpower necessary for an international peace force
to be equipped with agreed types of armaments.
Arrangements for the use of this force should ensure
that the United Nations can effectively deter or
suppress any threat or use of arms in violation of the
purposes and principles of the United Nations,
8, States participating in the negotiations should
seek to achieve and implement the widest possible
agreement at the earliest possible date. Efforts
should continue without interruption until agreement
upon the total programme has been achieved, and efforts
to ensure early agreement on and implementation of
measures of disarmament should be undertaken without
prejudicing progress on agreement on the total
programme and in such a way that these measures
would facilitate and form part of that programme, .
A
- 5 -
III
United States Reservation to the Agreed
Principles, in the Form qfjajjetter
from Mr. McCloy to Mr. Zorin of
September 20. 1961
At the 18 September 1961 session of our bilateral
discussions on disarmament you indicated that the
draft of a joint statement of agreed principles which
I submitted to you on behalf of the United States
Government on 14 September 1961 would be acceptable
to the Government of the Soviet Union provided the
following clause were omitted from paragraph 6:
"Such verification should ensure that not only
agreed limitations or reductions take place but
also that retained armed forces and armaments
do not exceed agreed levels at any stage."
This sentence expresses a key element in the United
States position which.we believe is implicit in the
entire joint statement of agreed principles that
whenever an agreement stipulates that at a certain
point certain levels of forces and armaments may be
retained, the verification machinery must have all
the rights and powers necessary to ensure that those
levels are not exceeded.
It appears from your statements that the Soviet Union will be unwilling to agree to a joint statement of agreed principles unless the above-mentioned clause is omitted therefrom,, My Government has authorized me to inform you that, in the interests of progress toward resuming disarmament negotiations, it is willing to remove the above-mentioned sentence from paragraph 6 of the joint statement of agreed principles since it is an item to which the Soviet Union has not agreed. This is done upon the express understanding that
the substantive position of the United States Government
as outlined in the above-quoted sentence and in our
memorandum of 14 September 1961 remains unchanged, and
is in no sense prejudiced by the exclusion of this
sentence from the joint statement of agreed principles.
The United States continues to adhere to and will
continue to advance the principle contained in the
omitted sentence as a necessary element in any
comprehensive disarmament negotiations or agreement.
c DOCUMENT IS T H E P R O P E R T Y O F H S R B R I T A N N I C M A J E S T V S G O V E R N M E N T )
C. (62) 49
C O P Y NO.
.**0
14th M a r c h , 1962 CABINET
F A R M P R I C E R E V I E W, 1962 Note b y t h e M i n i s t e r of A g r i c u l t u r e , and F o o d
Fisheries
I c i r c u l a t e for t h e i n f o r m a t i o n of m y c o l l e a g u e s t h e final t e x t of t h e White P a p e r on the A n n u a l R e v i e w a n d D e t e r m i n a t i o n of G u a r a n t e e s , 1962. 2. S i n c e the d i s c u s s i o n in C a b i n e t ( C . C . ( 6 2 ) 19th C o n c l u s i o n s , M i n u t e 6), when it w a s d e c i d e d t o r e d u c e t h e g u a r a n t e e d p r i c e for m i l k by 0 . 4 d . p e r g a l l o n a n d to s e c u r e s a v i n g s of £ 8 m i l l i o n on o t h e r c o m m o d i t i e s , I h a v e t h o u g h t f u r t h e r w h e t h e r we c o u l d n o t , within t h e l i m i t s set, m a k e the a w a r d r a t h e r m o r e b a l a n c e d and c o n s t r u c t i v e . 3. In c o n s u l t a t i o n w i t h m y A g r i c u l t u r a l c o l l e a g u e s a n d the o t h e r M i n i s t e r s m o s t d i r e c t l y c o n c e r n e d , I have c o m e to the conclusion that o u r a w a r d t h i s y e a r s h o u l d i n c l u d e a n e x t e n s i o n of t h e u p p e r l i m i t of the S m a l l F a r m e r S c h e m e ; t h e c o s t of t h i s t o b e offset b y a r e d u c t i o n in t h e f e r t i l i s e r s u b s i d y . 4. T h e s e c h a n g e s w i l l i m p r o v e t h e a w a r d a n d give it a b e t t e r look. Without t h e m o u r d e c i s i o n s would h a v e b e e n o p e n t o t h e c r i t i c i s m t h a t we h a d c o n c e n t r a t e d in a n e g a t i v e w a y on p r i c e c u t s r a t h e r t h a n constructive help. We s h a l l a l s o be t h e b e t t e r a b l e t o r e b u t t h e l i k e l y c h a r g e t h a t we a r e f a v o u r i n g t h e l a r g e f a r m e r s a t t h e e x p e n s e of t h e s m a l l e r m e n who a r e e s p e c i a l l y d e p e n d e n t on m i l k a n d e g g s . 5. I s h a l l b e a n n o u n c i n g t h e D e t e r m i n a t i o n on T h u r s d a y , 15th M a r c h , a f t e r Q u e s t i o n s and w i l l b e t e l l i n g t h e H o u s e a t t h e s a m e t i m e of o u r d e c i s i o n on t h e g e n e r a l m i l k s u b s i d y .
C.S.
M i n i s t r y of A g r i c u l t u r e , and F o o d , S. W. 1. I4th M a r c h , 1962.
Fisheries
AGRICULTURE ACTS, 1947 & 1957
ANNUAL REVIEW
AND DETERMINATION OF
GUARANTEES, 1962
ANNUAL REVIEW
AND DETERMINATION OF
GUARANTEES, 1962
CONTENTS
-'
I
Paragraphs I . ECONOMIC CONDITION OF THE AGRICULTURAL INDUSTRY
The Course of Production Changes in Income .. Costs and Efficiency .. Cost of Agricultural Support II.
III.
.. .. .. ..
.. .. .. ..
.. . .. ..
.. .. .. ..
.. .. .. ..
Long-term Assurances .. .. -. Milk Fat Cattle Fat Pigs Fat Sheep and Wool .. . . . . Eggs .. .. Cereals .. .. Potatoes .. .. .. .. .. Sugar Beet .. Production Grants Market Research and Development
-.
-
-
..
..
.. ..
- --
..
--
2-3 4 5 6
f
DETERMINATION OF GUARANTEES
EFFECT OF DETERMINATIONS
APPENDIX
APPENDIX
7-8 9-11 12-13 14 .. 15 16 17 - 18 19 - - 20-22 23-25
..
26-28
I. Table A. Agricultural Production in the United Kingdom. Table B. Agricultural Net Output in the United Kingdom. Table C. Estimated Purchases and Consumption of Concen trated Feedingstuffs on Farms in the United Kingdom. Table D. Imports of Concentrated Feedingstuffs and Produc tibn of By-products from Imported Grains and Seeds. II. Aggregate Farming Net Income in the United Kingdom.
APPENDIX
III. Aggregate Cost Changes taken into account at the Annual Review.
APPENDIX
IV. University Agricultural Economists' Data.
APPENDIX
APPENDIX
32133
V. Estimated Cost of Exchequer Support to Agriculture. VI. Guaranteed Prices determined in the light of the Annual Review, 1962. Part I. Price Tables. Part II. Additional Details of Guarantees.
A2
. ANNUAL
REVIEW AND DETERMINATION G U A R A N T E E S , 1962
OF
"
1. The 1962 Annual Review of the economic condition and prospects of the agricultural industry has been held in accordance with the Agriculture ' Act, 1947.
I. Economic condition of the Agricultural Industry The Course of Production 2. Agricultural net output continues to increase. On the index of net output introduced at the 1960 A n n u a l Review (1954/55 to 1956/57=100), the forecast for 1961/62 is 122 compared with revised figures of 119 for 1960/61 and 112 for 1959/60. On the old index based on pre-war as 100, the forecast of net output for 1961/62 is 183 compared with the revised figure of 178 for last year.
3. The wet weather in the autumn and winter of 1960 gave way to excellent spring sowing and planting conditions. Although the acreage of most crops was reduced, growth was generally good and yields satis factory. On the other hand, the output of some horticultural crops, particularly top fruit, was low though producers benefited from consequen tially high prices-. The output of livestock products generally, which account for nearly two-thirds of total agricultural output, has risen during the current y e a r : fatstock, milk, eggs and poultry have all shown substantial increases. Tillage operations for next season's crops are well advanced. Changes in Income 4. At the time of the last Review it was thought that the exceptionally wet weather in the preceding autumn and winter would adversely affect net income in 1961/62 and the Government took this into account in assess ing the prospects of the industry. In fact, however, the forecast of the industry's actual net income for the current year (to 31st May, 1962) is now.£431-1 million, compared with a revised estimate for 1960/61 of £389^ million. On the basis of normal weather conditions, the forecast for 1961/62 is £413-J million. This is £ 2 6 \ million more than the revised estimate for last year of £387 million, which was itself a record figure.
!
Costs and Efficiency 5. T h e cost of goods and services used in agriculture has risen by about the same amount as last year, due principally to increases in wages, rents and machinery expenses. The net increase for Review commodities is about £ 1 9 \ million. On the other hand, the efficiency of the industry continues to increase and a figure of £25 million can continue to be taken as an indication of the amount which, taking one year with another, the industry may expect to gain through increasing efficiency on Review commodities. Cost of Agricultural Support 6. There has been a marked increase in the cost to the Exchequer of agricultural support, details of which are given in Appendix V. In 1960/61 it was £263 million. In 1961/62 it is expected to be £351 million. On the basis of no change in the level of the guarantees, the estimated cost in 1962/63 is £339 million.
Long-term
II. Determination of Guarantees Assurances
7. I n accordance with the Agriculture Act, 1957, the present aeterrnina tions must be such that the total value of the guarantees* in the coming year, minus the a m o u n t of the net cost increase that has occurred on guaranteed commodities since the 1961 A n n u a l Review, is not less than 97J per cent, of their total value in 1961/62. In addition the guaranteed price for each commodity must be maintained a t not less than 96 per cent, of the corresponding price determined after the 1961 Annual Review ; and, for livestock a n d livestock products, ait not less t h a n 91 per cent, of the corresponding price determined after the 1959 Annual Review. 8. T h e total value of the guarantees in 1961/62 was a b o u t £1,351^ million and 97£ per cent, of this is £1,318 million, making a difference of £33£ million. F r o m this must be subtracted the relevant cost increase of about £19-J million, so the lower limit for the G o v e r n m e n f s determina tions is a reduction of a b o u t £14 million in the total value of the guarantees. Milk 9. Output of milk continues to increase both because of t h e increasing size of the datky herd a n d the upward trend of milk yields. As a result, sales of milk to the Milk Marketing Boards are expected to be 2,430 million gallons in 1961/62. This is a b o u t 100 million gallons more than in 1960/61, and a further substantial increase is expected in 1962/63. T h e dairy industry has again succeeded in increasing sales for liquid consumption, which have risen by over 24 million gallons to a total of about 1,580 million gallons in 1961. This increase will b e taken into account in t h e standard quantity on which the guarantee is based. But production is rising m u c h faster than liquid consumption a n d consequently t h e pool price t o (the producer continues to fall. 10. A n increase of 0-8d. per gallon in the guaranteed price was awarded a t the 1961 Review, in anticipation t h a t a satisfactory scheme would be devised which would bring h o m e to individual producers that o u t p u t beyond a certain level was n o t in their interest unless it could be produced profitably a t the price at which milk n o t required for liquid consumption can, b e sold for manufactaring. T h e industry has n o t as yet found a n alternative t o the present arrangements. T h e Government m a d e lit clear that, if a suitable system could n o t b e devised and introduced, ithey would b e bound to reconsider a t t h e 1962 A n n u a l Review t h e increase given in 1961. T h e Government have decided, after taking account of the fact t h a t the expected increase in production will, in itself, reduce t h e pool price, not t o remove this year more than half of last year's increase. T h e guaranteed price will, therefore, b e reduced by 0-4d. per gallon. 11. This means t h a t the average guaranteed price for the standard quantity of milk will b e 3s. l-85d. per gallon. There remains the problem facing the industry of a continuing reduction in the pool price per gallon * T h e total value of the guarantees is the s u m of (i) the value of the price guarantees (calculated for e a c h c o m m o d i t y by multiplying the guaranteed price by the quantity o f output qualifying for the guarantee) and (ii) the value o f the relevant production grants.
actually received by farmers so long as milk producers taken as a whole continue to increase production above the standard quantity. . . Fat Cattle
t
12. T h e r e has been a considerable increase in h o m e production of beef tin 1961/62, and the decline in the n u m b e r of calves retained for beef production, which was referred to dn the 1961 A n n u a l Review White P a p e r (Cmnd. 1311), now appears to have been arrested. Total supplies of beef (including imports) in 1961/62 will b e slightly higher than in the previous year, in spite of a net reduction in imports. There is likely to be a further small increase in h o m e production of beef in 1962/63, but the prospects are that o u t p u t will level off thereafter. 13. An abnormal pattern of marketing accompanied the increase in home production, and there was some deterioration in quality. As a result, market prices have been low, particularly a t certain times of the year. T h e Government have decided to raise -the general standard a t which cattle will be accepted for the guarantee. A new standard will also b e introduced t o enable young beasts of good conformation to become eligible a t a weight lower "than the general minimum. T h e m a x i m u m weights on which guarantee payments are. m a d e will be reduced a n d a further reduction will be considered a t the 1963 A n n u a l Review. The stabilising limits will b e widened to 10s. per cwt. o n either side of the weekly standard price. There will b e n o change i n the guaranteed price. Fat Pigs 14. Output of pigmeat, which fell slightly in 1960/61, made a marked recovery in 1961/62. The breeding herd continues to expand, but the rate of increase is now lessening. U n d e r the flexible guarantee arrangement introduced at the last Review to promote a steadier r a t e of production, the guaranteed price is adjusted periodically by reference to a forecast of the n u m b e r '0f pigs expected to receive the guarantee payment in a 12-month period. I n February, 1962, the forecast level of certifications was between 10-8 million a n d 11 million, which involved a n automatic reduction of 6d. per score in the basic guaranteed price. A further automatic reduction of 6d. p e r score will b e m a d e if the forecast reaches 11 million. The Govern ment h a v e decided to' m a k e n o change in the basic guaranteed price o r in the guarantee arrangements. Fat Sheep and Wool 15. Output of m u t t o n and lamb in 1961/62 is expected to be about 10 per cent, above the previous year's record level. The high rate of marketings, coupled with the general weakness of the meat market, has kept market prices very low and the unit rate of subsidy is running at about 60 per cent, of market value, the highest rate for any guaranteed commodity. There has also been a further increase in the breeding flock, so the prospect for the coming year must be one of continuing low market prices. The Government have decided to reduce the guaranteed price b y Id. p e r lb. I n addition, the maximum weights on which guarantee payments are made will be reduced to encourage marketing at the weights in strongest demand, and specifically to discourage retention of animals to heavy weights for the sake of the
guarantee. T h e stabilising limits will be widened to 3d. per lb. on either side of the weekly standard price. N o change is being made in the guaranteed price of wool. Eggs 16. T h e 1961/62 output of hen eggs is likely to be nearly 5 per cent, above t h a t of 1960/61 and slightly above the previous record level of pro ductipn in 1959/60. H o m e production continues to meet virtually the whole of the United Kingdom demand for shell eggs. Output in 1962/63 is again expected to be significantly higher. Wholesale prices in 1961/62 will be lower than in 1960/61 and are expected to fall further in 1962/63. It is clear that there is a danger of production exceeding demand. The Government have therefore decided to reduce the guaranteed price for hen eggs by l£d. per dozen. - . Cereals 17. T h e increase in the acreage of barley has cohtinued and was accentuated in 1961 by the limited sowing of wheat during the wet autumn of 1960. The acreage of oats and mixed corn has continued to fall, and the total cereals acreage in 1961 has fallen below the high level of 1960. Yields were better than expected and those of wheat, barley and oats were all above the five-year average. T h e wheat acreage is expected to recover in 1962, but the barley acreage may not reach the record level of 1961. The decline in the acreage of oats and mixed conn will probably continue. Market prices have improved in recent months. In general, the present balance between the guaranteed prices for the various cereals seems satisfactory and the Government have decided to make no change. Potatoes 18. Planting conditions for the 1961 crop were difficult in some areas and the potato acreage fell from 829,000 acres in 1960 t o 701,000 acres for the 1961 crop. The yield has, however, been excellent. Prices received by producers are well above the levels for the past two years. There is likely to be an increase in plantings for the 1962 crop which should give, with normal yields, a crop sufficient to meet the requirements for human oonsump tion. T h e Government have decided to make no change in the guaranteed price. Sugar Beet 19. T o give further encouragement to the production of beet of higher sugar content, which reduces costs both for producers and for the factories, the price differential for sugar content will be increased with effect from the 1963 crop. No change is being made in the guaranteed price or guarantee arrangements for the 1962 crop. Production Grants 20. Small Farmer Scheme. The Small Farmer Scheme has so far been confined to farm businesses with a standard labour requirement of not more than 450 man-days.. T h e Scheme is already doing much to improve the efficiency and profitability of some 40,000 farm businesses. The Government have decided to increase the upper limit to 500 man-days, which will bring within the scope of the Scheme a further 13,000 farms. The acreage limits remain unchanged.
21. Fertiliser Subsidy. Over the past three years the effects of reductions in the fertiliser subsidy have been more than offset by lower prices, and tiie amount of fertiliser used continues to increase. I t has been decided to reduce the rates of subsidy from 1st July next, thereby reducing the total annual subsidy by an estimated £2£ million. 22. Winter Keep and Grassland Renovation. Subject to legislative authority, the Government intend to introduce schemes for grants to encourage the production of winter keep in livestock rearing areas a n d the renovation of permanent grassland. Discussions with the Farmers' Unions are proceeding on proposals for these schemes, which would be linked with a revision of the existing ploughing grants. Market Research and Development 23. There is general agreement o n the importance of, a n d need for, improved marketing of agricultural a n d horticultural produce. T h e m a i n initiative for this must come from the industry, b u t the Government wish to give encouragement to it. Proposals which were m a d e t o the F a r m e r s ' Unions last year a n d briefly reported in the 1961 Annual Review White Paper have been further discussed with the Unions, a n d the Government are now introducing an agreed new scheme of grants for research a n d development 'im marketing. These will be m a d e in the first place for an experimental period of three years, u p t o a total of £ 1 ^ million, and will represent a small switch in Exchequer support from production to marketing. 24. The main purposes for which grant m a y be paid a r e : — (a) market r e s e a r c h ; (b) promotion of grading, standardization a n d better product presentation; (c) investigation of reasons for defective a n d sub-standard produce ; (d) communication to producers of the findings and results of (a) to (c) above, and of other information o n market requirements a n d h o w to satisfy them ; (e) promoting the business efficiency of local producers' marketing organisations ; a n d assisting the formation of new ones. 25. The rate of grant will vary between 25 a n d 75 per cent., according to the nature and cost of the project, a n d should average a b o u t 50 per cent. T h e scheme will be administered through a n Executive Committee, to be constituted by the Unions, which will have t h e initiative in m a k i n g proposals for grant. T h e Unions will meet the administrative costs in full within a limit of £10,000 a year. The results of new investigations and researches will be published from time to time. III. Effect of Determinations 26. This year's determinations, which are set out in detail in Appendix VI, result in a reduction of just under £11 million in the total value of the guarantees. This is necessary to secure the policy objectives for the main commodities affected and takes account of the other considerations set out earlier in this paper.
; 27. In making the determinations the Government have three main purposes in mind. Firstly, to tackle the problems facing certain commodi ties. Secondly, to give special help and encouragement to a further number of small farmers who, because of their rather higher levels of cropping or stocking, have been outside the scope of the present Scheme. Finally, the - Government believe that one of the most important needs for farming is the promotion of m a r k e t development and research. T h e industry and its leaders are rightly concentrating more and more effort in this direction; T h e G o v e r n m e n t s offer to contribute to a p r o g r a m m e of m a r k e t research a n d development has been accepted by the F a r m e r s ' Unions, and it is hoped that this will give a valuable impetus to the industry's progress in matching its products to the needs of the market. 28. These determinations have been made in the context of our existing arrangements: they have not been influenced b y the fact that negotiations are in progress between the United Kingdom and the European Economic Community. During these negotiations the Government will continue to keep in close touch with the leaders of the industry. Whatever may be the outcome, there will be a new situation calling for constructive policies. T h e industry may be sure that the Government will then discuss fully with its leaders how these can best be shaped in the interests of an efficient and prosperous home agriculture.
APPENDICES
wiSJ^J"^
0 f
t h e
S
a
i v e n
t h e 8 e
A f^! ? P Appendices differ from those in previous *f . ? information, improvements in methods of estimation and changes in the sources of data.
rnMStim
n M ,
b e
l m e
o f
l a t e r
^ " " " i
APPENDIX I TABLE A
Agricultural Production in the United Kingdom Years beginning 1st June
Unit
Pre-war average
1946/47
1958/59
1959/60
1960/61
1961/62 (fore cast)
1,856 16 929 2,403 97 723 335
2,062 55 2,211 3,567 458 1,423 436
2,208 23 2,755 2,217 281 821 439
1,929 14 3,059 2,032 232 816 434
2,102 19 3,372 1,974 203 829 436
1,827
19
3,827
1,723
147
701
427
8,907
13,300
11,165
10,912
11,182
10,858
6,868
7,072
18,051
17,930
Crop acreages (i):
Wheat Rye Barley Oats Mixed corn Potatoes Sugar beet . . All tillage
..
.
'000 acres
as
4,180
5,679
6,351
6,849
fJ
13,088
18,980
17,516
17,760
'000 tons
1,651 10 765 1,940 76 4,873 2,741
1,967 39 1,963 2,903 350 10,166 4,522
2,711 21 3,170 2,138 275 5,556 5,742
2,785 13 4,016 2,187 . 259 6,916 5,510
2,992 18 4,241 2,058 219 7,158 7,215
2,579 19 4,974 1,820 170 6,196 5,936
1,556 385 578 195 435 34
1,653 322 537 141 211 27
2,214 711 773 203 753 37
2,307 745 735 236 693 38
2,460 725 772 243 687 36
2,566 759 865 267 745 39
Temporary grass . Total arable
Crop production: Wheat Rye Barley Oats Mixed corn Potatoes Sugar beet
ii
ii ii
Livestock products: Milk Eggs (ii) Beef and Veal Mutton and L a m b . . Pigmeat (ii) Wool (clip)..
mill, galls. *000 tons
(i) Owing t o changes in the definition of "Temporary g r a s s " in the Agricultural Census, figures from 1959/60 onwards for this item and for " T o t a l a r a b l e " acreage are n o t directly comparable with those for the preceding years, (ii) Includes estimated production from units under o n e acre.
TABLE B
Agricultural Net Output in the United Kingdom (i) New Index (ii)
Old Index (iii)
(Average o f 1 9 5 4 / 5 5 1956/57 ^ 0 0 )
(Pre-war average = 100)
Years beginning 1st June 1950/51
..
. . . .
.
-
145
1951/52
149
153
1952/53 ...
103
156
..
95
152
1955/56
98
156
1956/57
107
161
1957/58
105
162
1958/59
102
1959/60
112
1953/54
..
..
1954/55
..
.i
..
..
.
161
.
169
1960/61 (provisional)
119
178
1961/62 (forecast)
122
183
..
(i) Includes estimated production from units under o n e acre. (ii) T h e new index measures year t o year changes in the value added at constant prices by farmers, landowners and farm workers t o all the g o o d s and services purchased from outside the agricultural sector. It is based o n the average of the years 1954/55 t o 1956/57. Details of the method of calculation of this index were given in the March, 1960 issue - ( N o . 70) o f " E c o n o m i c Trends ", published by H . M . Stationery Office. This index, like the old, is s h o w n in this Table to the nearest w h o l e number. (iii) T h i s is an index of net output at 1945/46 prices.
TABLE C
Estimated Purchases and Consumption of Concentrated Feedingstuffs on Farms in the United Kingdom (i) Million tons
Years beginning 1st June 1957/58
1958/59
1959/60
1960/61
1961/62 (forecast)
9-5
10-6
10-3
10-5
11-1
2-8
3-2
3-1
3-1
3-4
3. Total consumption o n farms . .
12-3
13-8
13-4
13-6
14-5
4. Current h o m e crop production forfeed(ii)
6-1
6-5
6-7
7-1
7-2
5. Balance of farmers' purchases to be met from mainly imported supplies (iii) . . .. ..
6-2
7-3
6-7
6-5
7-3
1. Farmers' purchases Home-grown concentrated feeds retained o n farm o f origin ..
,
(i) Purchases and consumption, b y occupiers o f holdings of over one acre, of concentrated feeds, including purchases o f home-grown cereals, pulse, etc., previously sold off farms to manufacturers and merchants. In trade terms, concentrated feeds consist of c o m p o u n d s , provenders, mixtures and straights. T h e quantities shown exclude the weight o f minerals and other supplements, and sacks. (ii) Including by-products from home-grown grains, dried sugar beet pulp, etc. (iii) Including by-products from imported grains, etc. and from the fishing industry. T h e quantities shown for this item differ from actual production o f by-products and supplies of imports as shown in Table D mainly because o f (a) the exclusion from Table C o f quantities consumed o n holdings of less than 1 acre; (6) the inclusion of home-produced fish meal; (c) wastage and other losses in the course of processing and distribution; (d) changes in the level o f stocks held by processors, distributors and other agents.
TABLE D
Imports of Concentrated Feedingstuffs and Production'of By-products from Imported Grains and Seeds Million tons
Years beginning 1st July 1957/58
1958/59
1959/60
1960/61
1. Imports o f concentrated feeding stuffs (i)
5-3
6-8
6-2
6-1
6-7
2. By-products from grains and seeds
2-0
2-1
2-0
2-0
1-9
imported .. ..
1961/62 (forecast)
(i) Including feed wheat and molasses but excluding imports o f coarse grains for human consumption and industrial purposes.
Aggregate Farming Net Income in the United Kingdom
TABLE A
" Departmental"
Calculation Years beginning 1st June £ million Adjusted t o normal weather conditions
Actual 1937/38 1946/47 1947/48 1948/49 1949/50 , .. 1950/51 .. 1951/52 1952/53 1953/54 1954/55 1955/56 1956/57 ' .. 1957/58 1958/59 1959/60 .. 1960/61 1961/62 (forecast)
.-.
...
. .
. .
"
—
56 194 228 2974 3134 2784 336 3474 346 3114 3474 338 3744 333 362 3894 4314
215 2354 2834 3034 2944 3284 343 330 3434 329 354 3714 376 361 387 4134
TABLE B
" Raised Sample " Calculation £ million 1937/38 1946/47 1947/48 1948/49 1949/50 1950/51 1951/52 1952/53 1953/54 1954/55 1955/56 1956/57 1957/58 1958/59 1959/60 1960/61 1961/62
61 167 161 237 225 204 2334 270 309 2584 2854 305 3664 3524 3204 3574 (not yet available)
Note (('). T h e e s t i m a t e s o f a g g r e g a t e f a r m i n g n e t i n c o m e i n T a b l e s A a n d B a r e a r r i v e d at after m a k i n g p r o v i s i o n f o r d e p r e c i a t i o n . N e t i n c o m e c a n b e d e f i n e d a s the reward for the m a n u a l a n d managerial labour o f t h e farmer a n d his wife, a n d for t h e use o f t h e occupier's investment. Note (ii). T h e s e t w o series o f a g g r e g a t e f a r m i n g n e t i n c o m e a r e c a l c u l a t e d i n f u n d a m e n t a l l y different w a y s . T h e " D e p a r t m e n t a l " e s t i m a t e i s b u i l t u p f r o m t h e statistics o f i n c o m e a n d expenditure for t h e w h o l e " n a t i o n a l " farm, w h e r e a s t h e " r a i s e d s a m p l e " is b a s e d o n s o m e 3 , 6 0 0 a c t u a l f a r m a c c o u n t s , w h i c h a r e e x p a n d e d o r " raised " t o give a n a g g r e g a t e f o r all f a r m s i n t h e U n i t e d K i n g d o m . T h e r e a r e a n u m b e r o f reasons w h y t h e levels o f aggregate n e t i n c o m e s h o w n in these t w o series s h o u l d vary b u t i t is difficult t o m a k e a q u a n t i t a t i v e a s s e s s m e n t o f t h e i n d i v i d u a l c a u s e s . B o t h series a r e o f v a l u e i n i n d i c a t i n g t h e g e n e r a l t r e n d i n t h e level o f i n c o m e .
Note (iii). The figures for aggregate npt income in Table A include as profit in recent years about £9 million on the production of food for consumption in the farm household. In other industries the corresponding sums are not treated as profit and are relatively much smaller (in many cases non-existent). ' , Note (iv). From the figures for aggregate net income in Table A certain sums should have been appropriated by farmers to cover the excess of replacement cost over original cost of certain assets (slaughter stock, cultivations, growing crops, etc.) used up in the course of the year's production and trade. These sums are:— 1937/38 1946/47 1947/48 1948/49 1949/50 1950/51 1951/52 1952/53 1953/54
.. .. .. .. .. .. .. .. ..
,. ..
£ million 1* 23 23i 17 29$ 41J 40 in 14
1954/55 1955/56 1956/57 1957/58 1958/59 1959/60 1960/61 1961/62
£ million
18J
.. 27
. . 3 0 .. Hi 21 .. ' 204 29 25 (forecast)
.. .. .. .. .. ... .. ..
TABLE C
Details of the " Departmental" Calculation for 1961 /62(forecast) compared with the Calculation for 1960/61 (revised) Years beginning 1st June £ million 1960/61 1961/62 (revised) (forecast)
Farm Expenses:
Labour R e n t and Interest. Machinery.. Feedingstuffs Fertilisers . . Other
Total . .
Net Income
300* 105* 214* 351J 111 180
1,263
3894
1,652$
299J 117 224 376 1144 190J
1,3214
4314
1,753
£ million 1960/61 1961/62 (revised) (forecast (forecast))
Farm Sales:
Milk and milk pro-
ducts .. Fatstock . . Eggs and poultry . . Farm crops Horticultural pro ducts Other Total
Production grants, sundry receipts and other credits Increase in the value o f farm stocks and work in hand
3524 430 2454 270 27044
365
4844
2484
276
140 554
1644 534
1,494
1,592
119
119
394
42
1,6524
1,753
Aggregate Cost Changes taken into account at the Annual Review (a minus sign denotes a cost decrease) £ million All Products Labour Rent and Interest Machinery expenses Feedingstuffs Seeds Fertilisers Haulage and Marketing Miscellaneous
R e v i e w Products
9-41 9-57 6-61 0-45 -1-51 -2-05 1-61 1-30
7-22 7-34 5-07 0-46 -1-16 -1-57 1-16 0-87
25-39
19-39
Note (i). These estimates are made on the assumption that any increase (or decrease) in the cost of an item of expenditure will continue for a full year and that there will be no change from the current usage of that item. Note (ii). The figures given above exclude an increase of approximately £0 - 6 million in respect of changes in feedingstuffs costs which are dealt with automatically by the feed formulae relating the guarantees for pigs and eggs to the cost of standard rations. Note (HI). The expression " Review Products " means the commodities, of the grades and descriptions for which guaranteed prices are provided, listed in Tables A and B in Part I of Appendix VI.
University Agricultural Economists' Data
Specimen Net Incomes for Different Types of Farming, 1960/61*
Average size o f farm
Average income per farm
Income per £100 rent
£
£
. . . . . . . .. ..
188 238 116 131 124 333
1,603 1,949 1,196 950 1,732 2,888
321 303 338 405 385 395
. . . . . . . . .. . . . . .. . . . . . . . . . . . .
157 159 161 222
1,538 918 1,205 1,832
621 504 559 420
64
679
. (acres o f crops and grass)
England and Wales: Mixed with substantial dairying . . General mixed .. .. Dairying . . . . .. Predominantly livestock . . . . Alluvial arable .. .. .. Light land arable . . . . ..
. . . . .
Scotland: Dairying .. .. Upland rearing .. Livestock with arable Cropping I.
Northern Ireland: Mixed livestock
..
..
. . . .
..
—
Mainly pigs and poultry . . . . . . .. " 48 797 — * These figures are a selection of those examined at the Annual Review. T h e average size of the sample farms for each type-group illustrated is rather larger than the average size o f all farms o f that type in the country as a whole.
-APPENDIX V Estimated Cost of Exchequer Support to Agriculture Financial years beginning 1st April £ million 1960/61
1961/62
I. Implementation of price guarantees Cereals— Wheat and rye Barley Oats and mixed corn
..
..
..
..
Potatoes .. Eggs, h e n and duck Fatstock— Cattle Sheep Pigs Milk (excluding school a n d welfare milk) Wool
18-1 33-6 11-7
21-5 33-7 18-3 63-4 5-7 . .22-5
.. 12-3 13-9 20-0 ..
..
Total I
73-5 8-0 15-5 50-8 32-7 40-2
46-2 10-8 2-6
123-7 13-0 2-6
151-2
236-3
32-2 8-7 10-9 2-7 0-8 1-5 1-0
33-0 8-8 10-5 2-7 0-8 1-5 0-8
9-0 17-6 4-6 0-7 0-9 7-8 5-9
7-5 18-2 4-9 0-8 0-8 9-3 7-5
0-2
0-4
II. Farming Grants and Subsidies Fertilisers subsidy L i m e subsidy .. Ploughing grants Field drainage grants (tiling, moling and ditching) . . Water supply grants .. Grants for improvement o f livestock rearing land .. Marginal Production Assistance grants .. .. B o n u s payments under the Tuberculosis (Attested Herds) Scheme Calf subsidy Hill cattle and hill cow subsidies .. .. Hill sheep subsidy Silo subsidies Grants for farm improvements Grants t o small farmers Other grants (grants t o producers in the Scottish Islands; grants to rabbit clearance societies; grants for improvement o f livestock; grants for bracken eradication; grants to machinery syndicates) .. T o t a l II Totals I and II . . Administrative expenses estimated to be applicable to the foregoing expenditure
104-5
107-5
255-7
343-8
6-1
6-3
261-8
350-1
III. Other services Arrangements for the benefit o f agricultural producers in Northern Ireland financed f r o m the U . K . Exchequer T o t a l estimated cost o f agricultural support
..
1-1
1-0
262-9
351 -1
Note (i). T h e figures for 1 9 6 1 / 6 2 a r e b a s e d o n t h e E s t i m a t e s a n d S u p p l e m e n t a r y E s t i m a t e s ( C l a s s V I I I , V o t e s 2 a n d 11). T h e figures f o r 1 9 6 0 / 6 1 r e p r e s e n t a c t u a l expenditure recorded in the Appropriation A c c o u n t s . Note (ii). P a y m e n t s i n r e s p e c t o f c e r e a l s , p o t a t o e s a n d w o o l r e l a t e p a r t l y t o t h e c r o p s or clips o f the year indicated a n d partly t o t h e c r o p s or clips o f t h e p r e c e d i n g year or years.
Note (iii). The following are relevant production grants for the purposes of the Agriculture Act, 1957, and the Annual Review:— Fertilisers subsidy t - Lime subsidy Ploughing grants Field drainage grants for ditching and moling (estimated cost £760,000 in1960/61 and £750,000 in 1961/62) Marginal Production Assistance grants Bonus payments under the Tuberculosis (Attested Herds) Scheme Calf subsidy Hill cattle and hill cow subsidies Silo subsidies Grants to small farmers Grants to producers in the Scottish Islands Grants to rabbit clearance societies Arrangements for the benefit of agricultural producers in Northern Ireland financed from the U.K. Exchequer.
APPENDIX VI
Guaranteed Prices determined in the light of the Annual Review, 1962
PART I.
PRICE TABLES
. For the bases of the prices given in the tables and other particulars of the guarantee arrangements see Part II of this Appendix. * TABLE A
Guaranteed Prices for Livestock and Livestock Products (a)
Commodity
Fat Cattle (per cwt.)
live
Fat Sheep and Lambs (per lb. estimated dressed carcase weight) Fat Pigs (per deadweight)
score
Eggs—hen (per dozen)
Eggs—duck (per dozen)
Wool (per lb.) Milk (average gallon)
(i) ' Guaranteed Prices 1961/62 determined after the A n n u a l Review, 1961
(ii) Price change compared with the 1961 A n n u a l Review Guarantee
(iii) Guaranteed Prices 1962/63 determined after the Annual Review, 1962
167s. Od.
N o change
167s. Od.
43s. 7d. (6) related to a feed price of 24s. 7d. per cwt. On the basis of the current feed price of 27s. 9d. per cwt. this guaranteed price is equivalent to 46s. 9d.
3s. 8-63d. ( c ) related to a feed price of 23s. 5d. per cwt. On the basis of the current feed price of 26s. 7d. per cwt. this guaranteed price is equivalent t o 3s. l l - 2 9 d .
2s. 3-06d. ( c ) related to a feed price of 23s. 5d. per cwt. On the basis of the current feed price of 26s. 7d. per cwt. this guaranteed price is equivalent to 2s. 5 - 7 2 d .
4s. 5 - 2 5 d . per
-
3s. 3d.
3s. 2 - 2 5 d .
Id.
N o change
-
l-5d.
3s. 2d.
46s. 9d. (6) related to a feed price of 27s. 9d. per cwt.
3s. 9 - 7 9 d . (c) related to a feed price of 26s. 7d. per cwt.
N o change
2s. 5-72d. (c) related to a feed price of 26s. 7d. per cwt.
N o change
4s. 5-25d.
-
0-4d.
3s. l - 8 5 d .
TABLE B
'
Guaranteed Prices for Crops (a)
(0
(ii)
(iii)
Guaranteed Prices for 1961 Harvest determined after the Annual Review, 1961
Price change compared with the 1961 A n n u a l Review Guarantee
Guaranteed Prices for 1962 Harvest determined after the A n n u a l Review, 1962
Wheat (per cwt.)
26s. l i d .
N o change
26s. l i d .
Barley (per cwt.)
27s. 7d.
N o change
27s. 7d.
Oats (per cwt.)
27s. 5d.
N o change
27s. 5d.
Rye (per cwt.)
21s. 7d.
N o change
21s. 7d.
..
265s. Od.
N o change
265s. Od.
Sugar Beet (per t o n , 16-5 per cent, sugar content)
128s. Od.
N o change
128s. Od.
Commodity
Potatoes (per ton)
id)
(d)
Notes on Price Tables (a) The guaranteed prices for fat cattle, fat sheep and wheat are average prices subject to variation seasonally; the guarantee payments for fat cattle and some fat pigs are subject to variation according to quality; and the method of calculating fatstock guarantee payments involves an element of estimation. Because the market ings of fatstock and wheat cannot be accurately forecast, producers' average returns under the guarantees for those products in any year may be a little more or less than the guaranteed prices. (b) The guaranteed price for pigs is subject to the flexible guarantee arrangement introduced in 1961/62. (c) The prices guaranteed to the British Egg Marketing Board for hen and duck eggs are subject to profit and loss sharing arrangements in accordance with the terms of a financial agreement between the Government and the Board. They include an allowance for the Board's administrative costs in operating the guarantee arrangements and marketing expenses (including packers' margins, packaging costs, transport and, in the case of hen eggs, certain trading losses). (d) The guaranteed price for barley is subject to arrangements whereby, to encourage a more even spread of marketings over the season, the deficiency payments are adjusted so that growers receive a h gher rate of acreags payment for birley delivered, after sale, in the later months of the cereal year than for barley delivered in the early months of the year. ;
P A R T II.
ADDITIONAL DETAILS OF GUARANTEES
1. The guaranteed prices shown in Part I of this Appendix for livestock and live stock products in 1962/63 and for crops of the 1962 harvest will be on a similar basis to those for the previous year except as stated in the following paragraphs. Fat Cattle 2. With effect from 26th March, 1962 the following standards of eligibility will apply: (a) Revised general minimum standard (i) If presented at a deadweight certification centre, the dressed carcase weight must be not less than 450 lb. in the case of a steer and not less than 390 lb. in the case of a heifer. The carcase must be of good conformation, the rounds, loins and ribs being reasonably well fleshed and the chucks and plates reasonably thick but the neck and foreshanks may be slightly long and thin. The Carcases of young animals of such conformation need have only a thin exterior fat covering. Carcases from older animals may possess a rather thicker fat covering but must not be excessively fat or patchy.
(ii) If presented at a liveweight certification centre, the animal must weigh not less than 1\ cwt.. in the case of a steer and not less than 6i cwt. in the case of a heifer. It must have an estimated killing-out percentage of not less than 54 per cent, and must, in the opinion of the fatstock officer, be such as to produce a carcase of at least the standard specified above.I (b) New standard for young animals of special conformation (i) The animal must not have cut any permanent incisor teeth. (ii) If presented at a deadweight certification centre the dressed carcase weight must.be not less than 430 lb. in the case of a steer and not less than 365 lb. in the case of a heifer. The carcase must be compact and heavily fleshed throughout, rounds plump and loins, ribs and chucks thick, neck and shanks short. Fat covering, which should be smooth and evenly distributed over the exterior of the carcase, may vary in quantity from medium to light. Cod or udder, kidney and aitch fat should be adequate but not excessive. (iii) If presented at a liveweight certification centre, the animal must weigh not less than 7 cwt. in the case of a steer and not less than 6 cwt. in the case of a heifer. It must have an estimated killing-out percentage of not less than 55 per cent, and must, in the opinion of the fatstock officer, be such as to produce a carcase of at least the standard specified above. ' (iv) An animal conforming with this standard will qualify for Grade I. 3. Maximum weights. As in previous years there will be no upper limit to the weight at which live cattle or their carcases may be certified, but any guarantee payment will be restricted to the following weights: 26th March, 1962 On and after to 1st July, 1962 2nd July, 1962 . Steers and Heifers Steers Heifers Liveweight .. .. 15 cwt. 14 cwt. 11 cwt. Dressed carcase weight . . 9501b. 8901b. 7001b. 4. Stabilising limits. With effect from 26th March, 1962 the stabilising limits will be 10s. Od. (instead of 7s. Od.) on either side of the weekly standard price. 5. The differential of 5s. Od. per live cwt. between the rates of guarantee payment for Grade I and Grade II cattle will be applied by increasing the average rate of guaran tee payment for home-bred cattle by 2s. Id. for Grade I and reducing it by 2s. l i d . for Grade II. The resultant rates of payment will be rounded to the nearest 6d. If in respect of any week the average rate of guarantee payment is 2s. l i d . per cwt. or less there will be no guarantee payment on Grade II animals and appropriate rates, to be announced separately, will be paid only on Grade I. Fat Sheep 6. As in previous years there will be no upper limit to the weight at which live sheep or their carcases may be certified, but any guarantee payment will be restricted to the following weights:— Dressed carcase weight^ 26th March, 1962 On and after to 1st July, 1962 2nd July, 1962 Lambs .. .. 551b. 501b. Hoggets and other clean sheep .. 65 lb. 60 lb. * In the case of sales by liveweight—estimated d.c.w.
In the case of sales by deadweight—actual d.c.w.
7. Stabilising Limits. With effect from 26th March, 1962, the stabilising limits will be 3d. (instead of 2d.) on either side of the weekly standard price. Milk The standard quantities for each area in 1962/63 will be increased as follows:— Million gallons New Standard Increase Quantity 1,721-1 England and Wales . . 22-9 Main Scottish Area . 10 185-8 Aberdeen and District 01 19-8 North of Scotland 01 9-4 Northern Ireland 0-5 97-6
Potatoes 9. The guarantee for the 1962 crop will be on the basis of a deficiency payments scheme similar to that in operation for 1961. 10. The Market Support Fund referred to in paragraph 27 of Cmnd. 1311 is intended to provide means of strengthening the market for potatoes in years of heavy surplus and low prices. If the 1962 crop gives rise to these conditions and the Market Support Fund has not been established, the Government will consult the Potato Marketing Board about the introduction of arrangements similar to those which applied to the 1959 and 1960 crops. Separate arrangements will be made to deal with the special position in Northern Ireland. Sugar Beet ii 11. 1962 Crop. The guarantee arrangements for sugar beet of the 1962 crop will be on a similar basis to those in operation for the 1961 crop, but for the 1963 crop the changes described in the following paragraph will be introduced. 12. 1963 Crop. The guaranteed price to be determined for the 1963 crop will be related to beet of 16-0 per cent, sugar content instead of 16-5 per cent, and the price differential will be increased from 7s. 6d. to 10s. Od., plus or minus, for each one per cent, sugar content. The price on which the- British Sugar Corporation^ contract for the purchase of sugar beet for processing at its Scottish factory is based will be the full guaranteed price (i.e., Is. 9d. per ton more than at present) and certain other terms of the contract will be varied as follows:— (i) beet will be purchased on " delivered-to-factory " terms; (ii) the present deduction in respect of dirt tare exceeding 15 lb. per cwt. will be abolished; (iii) on beet delivered by rail, the Corporation will pay rail freight in excess of 6s. 3d. per ton; and (iv) on beet delivered by road, the Corporation will pay rail freight from the grower's nearest station in excess of 12s. 6d. per ton.
(32133)
Wt
1361-35
K114
3/62
St.S.
:jlS DOCUMENT IS T H E P R O P E R T Y O F H E R B R I T A N N I C M A J E S T Y ' S G O V E R N M E N T )
0^(62^50
C O P Y NO. '
14th. M a r c h , - 1962
CABINET
E U R O P E A N AND AS I A N F A R M I N G IN K E N Y A M e m o r a n d u m by t h e S e c r e t a r y of S t a t e f o r t h e C o l o n i e s M y c o l l e a g u e s a s k e d for a m e m o r a n d u m s h o w i n g how t h e E u r o p e a n l a n d i n t e r e s t s in K e n y a w e r e d i v i d e d b e t w e e n t h e l a r g e r c o m m e r c i a l e s t a t e s and t h e s m a l l e r m i x e d f a r m s w h o s e t r a n s f e r t o A f r i c a n o w n e r s h i p w a s l i k e l y t o be d e m a n d e d ( C . C. (62) 20th C o n c l u s i o n s , M i n u t e 4 ) . I h o p e t h a t t h e i n f o r m a t i o n g i v e n b e l o w p r o v i d e s what t h e y h a v e in m i n d . 2. T h e E u r o p e a n a n d A s i a n f a r m i n g a r e a in K e n y a c o n s i s t s of 3, 600 a g r i c u l t u r a l h o l d i n g s of 20 a c r e s o r m o r e a n d i n t o t a l c o v e r s 7. 7 m i l l i o n a c r e s , of w h i c h 7 . 4 m i l l i o n a c r e s a r e i n t h e H i g h l a n d s . S i z e s of h o l d i n g s v a r y h o w e v e r b e t w e e n 268 of b e t w e e n 20 a n d 50 a c r e s up t o 11 of 5 0 , 000 a c r e s o r o v e r . T h e f o r m e r c a t e g o r y r e p r e s e n t s s e m i - a g r i c u l t u r a l h o l d i n g s on w h i c h a s m a l l a m o u n t of s p e c i a l i s e d a g r i c u l t u r e i s c a r r i e d out a s a m e a n s of s u p p l e m e n t i n g p e n s i o n s o r s m a l l p r i v a t e i n c o m e s , w h i l e t h e o t h e r e n d of t h e s c a l e r e p r e s e n t s l a r g e b e e f r a n c h e s in s e m i - a r i d a r e a s . The b r e a k d o w n b y c a t e g o r i e s is as follows: I.
N u m b e r of H o l d i n g s
(a) H o l d i n g s d e v o t e d w h o l l y o r m a i n l y to t h e p l a n t a t i o n c r o p s of s i s a l , coffee, t e a , sugar and wattle ,
550
(b) H o l d i n g s d e v o t e d w h o l l y t o l i v e s t o c k
370
(c) H o l d i n g s p r a c t i s i n g one f o r m o r a n o t h e r of m i x e d f a r m i n g
2,680 TOTAL
II.
3,600.
Acreage (Million)
(a) P l a n t a t i o n s of a l l k i n d s
2.0
(b) R a n c h e s o r d a i r y r a n c h e s
,
3.6
(c) M i x e d f a r m s a n d s m a l l h o l d i n g s TOTAL -1
2.1 7. 7 m i l l i o n acres
COMFIDENT1AL
ZALMFI.-QLE£ADJIGI£;
Ilk.
(I960)
(a) D e r i v e d
from plantation crops
18. 02
-
(b) D e r i v e d f r o m r a n c h e s a n d d a i r y r a n c h e s (by way of beef, wool a n d d a i r y p r o d u c t s ) (c)
4. 5
Derived from m i x e d f a r m s and smallholdings . . . . J. O T A J-J
15. 35 137.81
million
3. The above figures have been obtained from Kenya Government p u b l i c a t i o n s and t h e r e p o r t on t h e d a m a g e to a g r i c u l t u r e c a u s e d b y the r e c e n t floods a n d on t h e m e a s u r e s n e e d e d t o r e v i v e t h e i n d u s t r y b y ' a c o m m i t t e e u n d e r t h e c h a i r m a n s h i p of L o r d D e l a m e r e . T h e r e a r e no s t a t i s t i c s s h o w i n g t h e e x t e n t t o w h i c h m i x e d f a r m s - c a t e g o r y (c) a b o v e a r e h e l d by i n d i v i d u a l s ; h o w e v e r , of t h e 3 , 6 0 0 h o l d i n g s , 750 h o l d i n g s c o m p r i s i n g 3 . 7 m i l l i o n a c r e s , a r e o w n e d by c o m p a n i e s . It c a n a l s o be a s s u m e d t h a t f a r m s of u n d e r 2 , 5 0 0 a c r e s a r e m a i n l y h e l d b y i n d i v i d u a l s , p a r t n e r s h i p s a n d p r i v a t e c o m p a n i e s . In I960 t h e r e w e r e 2 , 9 3 0 s u c h h o l d i n g s , c o m p r i s i n g 2 , 3 5 0 , 0 0 0 a c r e s , of w h i c h 291,000 a c r e s w e r e forests and other unclassified land. Taking average values of £15 a n a c r e f o r a r a b l e , £100 f o r p e r m a n e n t c r o p s , a n d £ 5 for t h e o t h e r c a / t e g o r i e s , t h e t o t a l v a l u e of t h e m i x e d f a r m i n g l a n d h e l d in i n d i v i d u a l t e n u r e i s of t h e o r d e r of £ 3 0 - £ 3 5 m i l l i o n .
R.M.
C o l o n i a l Office, S. VT. 1. 14th M a r c h , 1962
-2